OLYMPIC FED. S&L v. OFFICE OF THRIFT SUPERVISIONCiv. A. No. 90-0482 (RCL).
732 F.Supp. 1183 (1990)
OLYMPIC FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff,
DIRECTOR, OFFICE OF THRIFT SUPERVISION, et al., Defendants.
DIRECTOR, OFFICE OF THRIFT SUPERVISION, et al., Defendants.
United States District Court, District of Columbia.
March 21, 1990.
Charles J. Cooper, McGuire, Woods, Battle & Boothe, Washington, D.C., for Olympic Federal Sav. and Loan Assn. Aaron B. Kahn, Office of Chief Counsel, Office of Thrift Supervision, Washington, D.C., for Director, Office of Thrift Supervision and Salvatore R. Martoche.
Leslie H. Southwick, Steve Frank, Mona B. Alderson, Dept. of Justice, Civ. Div., for FDIC.
LAMBERTH, District Judge.
Plaintiff Olympic Federal Savings & Loan Association ("Olympic") filed a motion on March 6, 1990, requesting that the court issue a temporary restraining order ("TRO") and a preliminary injunction ("PI") enjoining the Director of the Office of Thrift Supervision ("OTS") and the Federal Deposit Insurance Corporation ("FDIC") from appointing a conservator or receiver for Olympic. Plaintiff argues the following in support of its motion: first, that both M. Danny Wall, the previous Director of OTS, and Salvatore R. Martoche, the current Acting Director of OTS, were unconstitutionally appointed and therefore have no legal authority to appoint a conservator or receiver; second, that the regulations
I. Factual Background.
In the late 1970's and early 1980's, the thrift industry was undergoing a crisis of unprecedented magnitude. High interest rates forced most thrifts to pay out more in interest on deposits than they earned on their portfolio of long-term, fixed-rate mortgages. This interest rate spread drove many thrifts into insolvency. Memorandum of Law in Support of Plaintiff's Motion for a Temporary Restraining Order and a Preliminary Injunction (filed Mar. 6, 1990) ("Plaintiff's Initial Memorandum"); see also Defendant FDIC's Memorandum in Opposition to Plaintiff's Motion for a Temporary Restraining Order at 2, 4-5 (filed Mar. 6, 1990) ("FDIC's TRO Opposition").
The thrift industry was regulated at the time by the Federal Home Loan Bank Board ("FHLBB") and its insurance arm, the Federal Savings and Loan Insurance Corporation ("FSLIC"). Faced with a large number of failing thrift institutions, the FSLIC and FHLBB recognized that the FSLIC insurance fund would quickly be exhausted if the government continued to provide financial assistance to all troubled thrifts. Plaintiff's Initial Memorandum at 3; see also FDIC's TRO Opposition at 5. In mid-1981, the FSLIC and FHLBB therefore revised their policies and practices to prevent, or at least forestall, the exhaustion of the FSLIC insurance fund. Plaintiff's Initial Memorandum at 3. They began inducing and arranging supervisory mergers by providing assistance in the form of an intangible asset — "supervisory goodwill" — rather than in the form of cash. Id.
This was accomplished by allowing thrifts to account for mergers using the "purchase method" of accounting. Id. Under this method, the book value of the assets and liabilities of an acquired thrift were adjusted ("marked to market") to their fair market value at the time of the acquisition. Id. at 4. The excess in the cost of the acquisition (including any liabilities assumed by the acquirer) over the fair market value of the acquired assets was then separately recorded on the acquiring thrift's books as "goodwill" — an intangible, non-earning asset subject to amortization on a straight-line basis over as many as 40 years. Id. FHLBB's regulations governing the minimum capital requirements for FSLIC-insured thrifts allowed thrifts to include "supervisory goodwill" in capital. Id. at 4-5.
Olympic is the product of a number of mergers consummated between 1982 and 1984. Id. at 7-13. Olympic booked more than $160 million in supervisory goodwill as a result of these mergers. Id. at 13. After the mergers had been completed, Olympic's tangible capital level was a negative $140 million, or negative 25.75 percent of total assets. Id. at 14. Since 1984, Olympic has amortized more than $43 million of its supervisory goodwill. Id.
The thrift industry's problems did not disappear when interest rates began declining in late 1982. Indeed, when President Bush took office in January of 1989 the S & L industry remained in a "crisis" situation. President Bush made the S & L crisis a top priority of his new administration. FDIC's TRO Opposition at 5. He submitted to Congress a bill proposing a major restructuring of the way in which the federal government regulates the savings and loan industry. The bill was approved by Congress and on August 9, 1989, President Bush signed the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") into law. Plaintiff's Initial Memorandum at 15.
FIRREA provides that the Director of OTS shall be appointed by the President, by and with the advice and consent of the Senate, for a term of five years. FIRREA § 301, 103 Stat. 278. FIRREA also provides that vacancies in the office of Director which occur before the expiration of a term shall be filled by the President, by and with the advice and consent of the Senate. Id. However, FIRREA contains a "grandfather" clause pursuant to which the Chairman of the FHLBB on the date of FIRREA's enactment was statutorily appointed OTS' first Director. Id. By operation of this provision, M. Danny Wall became OTS' first Director. Plaintiff's Initial Memorandum at 16.
Under Mr. Wall's leadership, OTS promulgated new capital regulations in accordance with FIRREA's provisions. Id. at 19; FDIC's TRO Opposition at 8-9. The new capital regulations permit thrifts to include "supervisory goodwill" only to meet "risk-based" capital requirements and only in accordance with a phase-out schedule set forth in FIRREA. Plaintiff's Initial Memorandum at 20.
Olympic does not comply with the new capital requirements. Id. at 23. It is currently operating subject to a number of business restrictions imposed by OTS. Id. at 24. Moreover, because Olympic does not meet the new capital requirements, the Director has statutory authority to take over the thrift by appointing a conservator or receiver and, if necessary, to direct that person to liquidate the thrift. Id.
Recognizing the threat to its continued operations and believing that various statutory, constitutional and other grounds existed upon which it could challenge OTS' acts, Olympic filed its complaint in this case on March 1, 1990. Among other things, Olympic alleged that M. Danny Wall, then Director of OTS, had been unconstitutionally appointed. Complaint, at ¶ 61. Contemporaneously with filing its complaint, Olympic advised counsel for defendants that it intended to challenge the constitutionality of Mr. Wall's appointment. Supplemental Memorandum of Law in Support of Plaintiff's Motion for a Preliminary Injunction, at 2 (filed Mar. 9, 1990) ("Plaintiff's Supplemental Memorandum"). On March 5, 1990, Mr. Wall ceased to be Director of OTS and the President appointed Salvatore Martoche Acting Director of OTS pursuant to the Vacancies Act, 5 U.S.C. §§ 3345-49. OTS' TRO Opposition at 9.
On March 6, 1990, after OTS had refused to assure Olympic that it would not appoint a receiver or conservator and had refused to agree to provide Olympic with notice of its intent to appoint a receiver or conservator, Olympic filed its motion for a TRO and for a PI. Plaintiff's Supplemental Memorandum at 2. Defendants argued in opposition that plaintiff's Appointments Clause challenge had been mooted by Mr. Wall's resignation and that, in any event, plaintiff was not entitled to the extraordinary relief it requested. At oral argument on its motion for a TRO, Olympic countered by arguing that Salvatore Martoche's designation as Acting Director under the Vacancies Act was improper, and that therefore Mr. Wall's resignation had not mooted its Appointments
A. Ripeness, Standing, and Jurisdiction.
Before the court can reach the merits of Olympic's claim, it must decide whether Olympic's claim is ripe, whether Olympic has standing to challenge the appointments of Mr. Wall and Mr. Martoche, and whether FIRREA precludes this court from hearing Olympic's case.
Defendant OTS asserts that the Acting Director has not made any decision to appoint a receiver or conservator for Olympic. Indeed, according to OTS it is possible that the Director will never decide to appoint a receiver or conservator for Olympic. As a result, OTS contends, Olympic's challenge is premature.
The court can not reasonably conclude that plaintiff's harm is not sufficiently imminent and concrete to make its claim ripe. "[B]oth the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration" show that this case merits immediate review. Abbott Laboratories v. Gardner,
Defendant FDIC next argues that Olympic lacks standing for two reasons: first, that Olympic lacks Article III standing because its injury — if one exists — will not be redressed by a decision that OTS' two Directors were unconstitutionally appointed; and second, that Olympic lacks prudential standing because it is not within the zone of interests that Congress intended a private party to assert.
a. Article III Standing.
In order to establish standing to challenge a particular act or policy, a litigant must "`show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant,' and that the injury `fairly can be traced to the challenged action' and `is likely to be redressed by a favorable decision.'" Valley Forge Christian College v. Americans United for Separation of Church and State, Inc.,
According to the FDIC, Olympic fails to satisfy this test because plaintiff's injury, if any exists, is not likely to be redressed by a favorable decision on its constitutional claim. Defendant FDIC's Memorandum in Opposition to Plaintiff's Motion for a Preliminary Injunction at 3 (filed Mar. 13, 1990) ("FDIC's PI Opposition"). Defendant alleges that plaintiff's ultimate difficulty is its failure to meet legislatively mandated capital standards which must be imposed by whomever is at the head of OTS. Id. Defendant contends that "[p]laintiff's grievance, at bottom, is a fundamental quarrel with Congress' strict mandate of minimum thrift capital," and that "[c]hallenges to the specific officer entrusted to implement that mandate beg the question of the source of plaintiff's ultimate injury — the United States Congress." Id. at 4. The FDIC concludes that because resolution of the Appointments Clause issue will not affect Olympic's failure to meet the capital requirements or relieve it from the threat of government intervention, Olympic lacks Article III standing.
Defendant's argument ignores a critical element of plaintiff's claim. In the end, plaintiff clearly hopes to avoid having a conservator or receiver appointed for it. However, this is not all plaintiff seeks. Part of plaintiff's claim is that, under the Constitution and laws of the United States, it is subject to regulation only by individuals with legal authority to act. If this court attempted to appoint a conservator or receiver pursuant to FIRREA, plaintiff clearly could complain that this court has no authority to take such action, for even if grounds for appointment exist, this court simply has no right to exercise the Director's appointment power. This is the essence of plaintiff's constitutional claim: because Mr. Martoche was not properly appointed, he has no more right to exercise the Director's appointment powers than this court does. And this is the injury which a finding for plaintiff on its constitutional claim would redress: the injury which any citizen suffers when its government acts unconstitutionally against it. Even if a receiver or conservator ultimately is appointed, success on plaintiff's constitutional claim would protect its right to demand that those who act against it on behalf of the government do so both lawfully and constitutionally. See Andrade, 729 F.2d at 1496 (in many procedural due process cases, graveman of complaint is that government must act in accord with due process principles when it takes action
The FDIC's argument is flawed for a second reason. According to defendant, it does not really matter who is in the office of Director: Congress has mandated minimum capital requirements, Olympic fails to meet those requirements, and therefore any person acting as Director is equally likely to appoint a conservator or receiver for Olympic. This argument asks the court to assume that both FIRREA's grant of discretion to the Director and the protections conferred by the Constitution are meaningless, for although both affect the process by which the outcome is reached, neither affects the ultimate outcome. The court can not and will not accept this proposition. The court can not accept it because the court is bound by the Court of Appeals' decision in Andrade, 729 F.2d at 1495-96, which explicitly rejects the claim that one cannot maintain an Appointments Clause challenge unless one can show that, had the Constitution's requirements been followed, the outcome would have been different. The court will not accept it because the court absolutely rejects the proposition that the procedural protections conferred by various statutes and by the Constitution are nothing more than hollow gestures at the appearance of democracy. The Appointments Clause subjects the selection process to public scrutiny, thereby affecting who takes office, how they perceive their function, and how they exercise their powers. See Andrade, 729 F.2d at 1495 and n. 35 (Appointments Clause gives Congress some control over Executive Branch, within framework of system of checks and balances).
In light of the foregoing, the court concludes that a favorable decision on plaintiff's constitutional question will redress at least one of plaintiff's threatened injuries. The court therefore finds that plaintiff has Article III standing.
b. Prudential Standing.
Defendant FDIC also claims that this court should refuse to hear plaintiff's case on "prudential standing" grounds because plaintiff has not demonstrated that it is within the zone of interests that Congress intended a private party to assert. FDIC's PI Opposition at 4-8. It states that "Congress could not logically have intended to allow a private party to have standing to assure anything more than that the officer who acts in its regard acts with the independent authority of the Executive Branch and with prior concurrence of the Senate for this position." Id. at 5. The court rejects this claim as well.
The Vacancies Act makes clear that Congress is concerned with more than ensuring that only confirmed officers act on behalf of the government. The Vacancies Act allows only confirmed officers to be designated as acting officials; however, it also places strict time limits on the life of a Vacancies Act designation. If the government were correct and the Vacancies Act sought only to assure that acting officers had undergone a confirmation process, presumably Congress would have written a much more generous time limit into the Vacancies Act.
The government also claims that only legislators should be granted standing to challenge unconstitutional appointments. FDIC's PI Opposition at 7. This argument ignores the Constitution's basic purpose. Although the Senate clearly has a strong interest in protecting its role in the confirmation process, the Constitution was not written to protect the interests of the Senate, the Congress, the President, or any other branch or division of government. The Constitution and its system of checks and balances was written to protect the people. The restrictions it placed upon the branches' exercise of power were not designed to ensure the branches' interest in equal power, but to ensure that citizens would not find themselves governed by a single branch which had swept all the government's power into its domain. Thus, entities which will be directly harmed by unconstitutional appointments clearly fall within the zone of interests which the Appointments Clause and the entire system of checks and balances was designed to protect.
For the foregoing reasons, the court concludes that plaintiff has Article III standing to raise its constitutional challenge and that the court should not refuse to hear plaintiff's claim on prudential grounds.
Defendants' third challenge is that this court does not have jurisdiction to adjudicate plaintiff's claim or grant plaintiff the relief it requests. According to OTS, FIRREA explicitly prohibits federal district courts from reviewing the Director's decision to appoint a receiver or conservator before the fact and prohibits a district court from enjoining the appointment of a conservator or receiver. OTS' PI Opposition at 3-4; OTS' TRO Opposition at 12-19.
FIRREA provides in pertinent part that:
FIRREA § 301, 103 Stat. 292.
OTS' entire argument on this issue fails to recognize the essence of plaintiff's claim. Olympic does not challenge the grounds upon which the Director will appoint a receiver or conservator; Olympic challenges the Director's constitutional authority to appoint a receiver or conservator.
Because plaintiff's challenge is ripe, because Olympic has standing to challenge Mr. Martoche's constitutional authority to act as Director of OTS, and because nothing in FIRREA removes this court's general jurisdiction to hear an Appointments Clause challenge, the court may reach the merits of plaintiff's request for preliminary injunctive relief.
B. Plaintiff's Right to Injunctive Relief.
In deciding whether to issue a preliminary injunction, a trial court should consider (1) the plaintiff's likelihood of success on the merits, (2) the threat of irreparable injury to the plaintiff in the absence of injunctive relief, (3) the possibility of substantial harm to other interested parties from the injunctive relief, and (4) the public interest. Foundation on Economic Trends v. Heckler,
1. Plaintiff's Likelihood of Success on the Merits.
Plaintiff argues that both the previous OTS Director, M. Danny Wall, and its current Acting Director, Salvatore R. Martoche, were appointed in violation of the Constitution's Appointments Clause. As a result, plaintiff contends that Mr. Martoche may not constitutionally exercise the authority, conferred upon the Director by FIRREA, to appoint a conservator or receiver for it. Defendants respond with four arguments: first, that Mr. Wall's appointment as Director of OTS did not require re-confirmation; second, that Mr. Martoche's designation under the Vacancies Act was proper even if Mr. Wall never constitutionally became OTS' Director; third, that the President had the inherent constitutional authority to designate Mr. Martoche as Acting Director even if he did not have statutory authority to do so; and finally, that Mr. Wall and Mr. Martoche validly delegated their powers to others while acting as de facto officers and that therefore those delegated officials may appoint a receiver or conservator even if Mr. Martoche cannot.
a. Mr. Wall's Appointment.
The Appointments Clause of the Constitution provides that:
U.S. Const. art II, § 2, cl. 2. As an officer of the United States, the Director of OTS— like "any [other] appointee exercising significant authority pursuant to the laws of the United States"—must be appointed in the manner prescribed by the Constitution's Appointments Clause. Buckley v. Valeo,
Mr. Wall was appointed as OTS' initial Director by operation of section 301 of FIRREA, which provided that the Chairman of the FHLBB on the date FIRREA became effective would become OTS' initial Director and would serve as Director until his term as chairman of the FHLBB would have expired. FIRREA § 301, 103 Stat. 278. Thus, Mr. Wall clearly was not appointed in the manner specified by the Constitution. The government contends, however, that Mr. Wall's responsibilities as Director of OTS were essentially identical to (although more limited than) his responsibilities as Chairman of the FHLBB. The government concludes that therefore Mr. Wall's "appointment" as Director did not require re-nomination and reconfirmation. FDIC's PI Opposition at 29-38 (citing Shoemaker, 147 U.S. at 282, 13 S.Ct. at 361).
In Shoemaker, a landowner challenged the act creating Rock Creek Park in Washington, D.C. The act created a commission to select the land for the park, to arrange to have the land surveyed, to determine the amount of compensation due landowners whose land was taken for the park, and to perform certain other duties. Id. at 284-86, 13 S.Ct. at 363-64. The heirs of one of the persons whose land was to be included in the park sought to prevent the land from being taken by raising a number of challenges to the constitutionality of the act and to the validity of proceedings under the act. Id. at 288, 13 S.Ct. at 364. Among other things, they challenged a provision in the act which directed that the Chief of Engineers of the United States Army and the Engineer Commissioner of the District of Columbia would serve as two of the five commission members. Id. at 284, 289, 300-01, 13 S.Ct. at 363, 365, 391. They argued that, "while Congress may create an office, it cannot appoint the officer; ... the officer can only be appointed by the President with the approval of the Senate...." Id. at 300, 13 S.Ct. at 391.
The Court rejected this argument, holding that:
Id. at 301, 13 S.Ct. at 391 (emphasis added).
The Shoemaker case is distinguishable from this case in two important respects. First, the provision challenged in Shoemaker added certain duties to two offices; it did not confer additional responsibilities on any particular officer. Had the Chief of Engineers of the United States Army or the Engineer Commissioner of the District
Another important fact distinguishes this case from Shoemaker. In Shoemaker and the cases which have relied on its reasoning, see FDIC's PI Opposition at 33-34, the duties of one office were supplemented or were transformed. Service on the Rock Creek Park commission became an additional duty of the Chief of Engineers of the Army; the Secretary of Health, Education and Welfare became the Secretary of Health and Human Services. Here, however, two members of the Federal Home Loan Bank Board were removed by operation of FIRREA, and only the third had his responsibilities transferred to OTS. Had OTS been placed under the supervision of a three-person board, this court believes that the government's argument would be correct and that the three former FHLBB members would not have required re-confirmation. However, when Congress decided that only one of the three FHLBB members would have his responsibilities transferred and, moreover, decided specifically which of the three would become the new Director, it went beyond simply changing the duties of an office and appointed a person to a new post. This difference makes Shoemaker inapposite.
Although the Supreme Court's decision in Bowsher, 478 U.S. at 714, 106 S.Ct. at 3181, is not controlling, its holding supports this limit on Shoemaker's holding. In Bowsher the Court held that "[a] direct congressional role in the removal of officers charged with the execution of the laws ... is inconsistent with separation of powers." Bowsher, 478 U.S. at 723, 730, 106 S.Ct. at 3186, 3190. Congress clearly may abolish offices, thereby effectively removing the officers who hold those offices. Thus, the situation presented herein does not directly violate Bowsher's mandate. However, when it abolished one agency and removed its three officers, yet designated one of the three as the head of the newly-created successor agency, Congress exercised the kind of decisionmaking about who will serve in Executive department posts that the Constitution says it cannot. Indeed, the closer the relationship between the functions of the FHLBB and OTS—and thus the more Shoemaker is applicable— the more serious the Bowsher problem.
For the foregoing reasons, the court concludes that Shoemaker does not apply to the facts of this case. As a result, Mr. Wall required re-nomination and re-confirmation before he could constitutionally take office as OTS' Director. Since he was never re-nominated or re-confirmed, he never constitutionally took office.
b. Mr. Martoche's Appointment.
After this lawsuit was filed and the day after Mr. Wall's resignation became effective, the President issued the following order:
OTS' TRO Opposition, at Exhibit E (order directing Mr. Martoche to perform duties
Olympic contends that the President's designation of Mr. Martoche as Acting Director pursuant to 5 U.S.C. § 3347 is improper. According to Olympic, section 3347 does not give the President authority to fill a vacancy caused by the resignation of any person other than a constitutionally appointed officer. Because Mr. Wall was never constitutionally appointed Director of OTS, Olympic concludes that his resignation does not fall within the scope of section 3347. The government responds with two arguments: first, that plaintiff's interpretation of section 3347 is incorrect and that Mr. Martoche's designation under that section was proper; and second, that even if the designation under section 3347 was improper, the designation was a proper exercise of the President's inherent powers.
i. Was Mr. Martoche Properly Designated Under the Vacancies Act?
In the Vacancies Act, Congress delegated to the President limited authority to temporarily fill certain vacancies. The Act, 5 U.S.C. § 3345 et seq., provides in pertinent part:
Olympic's argument, briefly stated, is as follows. Section 3347 provides an alternative way in which the President may fill vacancies under sections 3345 and 3346, but does not itself authorize the President to fill vacancies. Therefore, the President can fill a vacancy under section 3347 only if it is the type of vacancy described in section 3345 or 3346. Section 3345 applies when the head of an Executive agency (other than the General Accounting Office) or military department dies, is sick, or is absent, and thus is inapplicable in this case. Section 3346 applies "[w]hen an officer of a bureau of an Executive department or military department, whose appointment is not vested in the head of the department, dies, resigns, or is sick or absent." Because Mr. Wall never constitutionally became an officer, his resignation does not constitute the resignation of "an officer of a bureau of an Executive department." As a result, neither section 3345 nor section 3346 authorized the President to temporarily fill the office of Director following Mr. Wall's resignation. Since the President lacked statutory authority to appoint Mr. Martoche and since the President did not appoint him in the manner specified by the Appointments Clause, Mr. Martoche's appointment is invalid and—like Mr. Wall before him—Mr. Martoche is without constitutional power to take any action as Director of OTS.
The court, after careful review of the relevant statutes, historical references, and cases, has determined that plaintiff's interpretation is correct. Section 3347 is
Section 3346 does not "otherwise provide" a meaning for the term "officer," and therefore pursuant to section 2104 this court must construe that term to mean "constitutional officer" (i.e., an officer selected by the President with the advice and consent of the Senate or an officer whose appointment was delegated by Congress to the President alone, to the head of a department, or to the Judiciary). See also H.R. Rept. No. 1389, Enactment of Title 5, United States Code, Entitled "Government Organization and Employees", 89th Cong., 2d Sess. 67-68 (1966) (in discussing changes made to 5 U.S.C. § 3332, committee stated that "[t]he term `officer' is coextensive with and substituted for `Each individual appointed hereafter as a civil officer of the United States by the President, by and with the advice and consent of the Senate, or by the President alone, or by a court of law, or by the head of a department' in view of the definition of `officer' in section 2104.").
The government argues that section 2104's definition of officer is forward looking. Focusing on the language which defines an officer as an individual "who is ... required by law to be appointed," the government contends that section 2104 does not require that the resigning officer was appointed, just that he was required to have been appointed. Thus, the government concludes, section 2104 does not require that Mr. Wall's appointment was constitutional, just that he occupied the position of an officer of the United States. This argument not only misreads the plain language of section 2104, it would unacceptably broaden the President's authority under the Vacancies Act. In effect, the government's argument would mean that the President could unconstitutionally "appoint" an "officer," have him resign, and then use the Vacancies Act to fill the post for up to 120 days. The court cannot allow the government to use the fact that the initial Director was unconstitutionally appointed to bootstrap its way into a Vacancies Act designation, for this violates both the terms and the spirit of the Vacancies Act. Instead of accepting the interpretation urged by the government, the court interprets section 2104 as meaning that to become an officer, one must satisfy the basic legal requirement for taking office: i.e., to take office, one is required to be appointed.
In a similar vein, the government argues that whether or not Mr. Wall ever became a de jure officer, he was a de facto officer and thus an "officer" who "resigned." FDIC's PI Opposition at 19-20, 25. The court rejects this argument as well. The de facto officer doctrine works to protect the public interest by validating prior acts of persons performing the duties of an office under color of title. See Andrade, 729 F.2d at 1496 and cases cited therein. However, despite its name, it does not transform the nonofficer into an officer. Moreover, allowing the President to invoke the Vacancies Act whenever a de facto officer resigns would potentially allow the same kind of bootstrapping discussed above.
The government next argues that even if the term "officer" as used in section 3347 means constitutional officer, the statute should be interpreted as giving the President authority to fill vacancies, however created. The court is not free to do this. The statute clearly states that it applies "[w]hen an officer ... dies, resigns, or is sick or absent." Although defendants' argument is certainly logical, it is up to Congress— not this court—to decide the conditions under which the President may designate temporary replacements. Had Congress wanted to give the President general power to fill vacancies, it could have done so by wording the statute differently. The strict time limits placed upon life of a Vacancies Act designation clearly threaten that, in some instances, there will be no way under the Vacancies Act to appoint an interim official. However, a court would not be free to ignore these limits in order to avoid finding that an agency had no chief officer. Similarly, this court can not ignore the statute's clear provision detailing when the President may exercise Vacancies Act powers in order to avoid finding that OTS has no Director. Congress has been on notice for more than 100 years that the Vacancies Act has generally been interpreted as giving the President authority to designate officers only when the statute's express terms are satisfied. For example, a 1909 Attorney General opinion concluded that the President could not make a Vacancies Act appointment where the vacancy was caused by the retirement of a bureau chief. 27 Opp. Atty. Gen 337, 345 (1909). The Attorney General observed that "no provision is made in any of [the Vacancies Act] sections for temporarily filling a vacancy caused by the retirement of the chief of a bureau." He concluded that "if the vacancy be caused by the retirement of the incumbent, Congress having made no provision for the temporary discharge of his duties, the Bureau remains without a
The above opinions are of course not binding precedent. However, they are useful for two purposes. First, these opinions show that the Attorney General and other senior government officials have, for the last 100 years, interpreted the Vacancies Act as giving the President authority to make interim appointments only when the express conditions of the Act are satisfied. As defendants point out, the Attorney General is charged with responsibility for ensuring that only lawfully appointed officials act on behalf of the United States, and consequently his interpretation of law on
The government argues that FIRREA itself represents Congressional support for a broad interpretation of the Vacancies Act. According to the government, "the obviously disastrous effects [a narrow reading] would have on Congress' legislative efforts to salvage the thrift industry itself suggests the unlikelihood that Congress could have intended plaintiff's interpretation of the Vacancy Act." FDIC's PI Opposition at 9; see also id. at 11. However, the Vacancies Act was enacted long before FIRREA and thus Congress' goals in enacting FIRREA are irrelevant in interpreting the Vacancies Act.
Not only does FIRREA not support the government's broad interpretation of the Vacancies Act, it argues against that interpretation. FIRREA specifically provides that "[a] vacancy in the position of Director which occurs before the expiration of the term for which a Director was appointed shall be filled in the manner established in paragraph (1) [appointment by President, by and with advice and consent of Senate], and the Director appointed to fill such vacancy shall be appointed only for the remainder of such term." FIRREA § 301, 103 Stat. 278. The court cannot accept the government's claim that this provision "is boilerplate language of the kind that exists in countless statutes" and that it was included "merely to provide a method by which a permanent replacement for the Director may be appointed when the incumbent leaves before the end of his term." FDIC's PI Opposition at 10 n. 8 (emphasis in original). If this were true, the portion of the provision requiring Senate confirmation would have no effect: the Vacancies Act allows only for temporary designations, and FIRREA mandates that the Director must be appointed with the advice and consent of the Senate. Thus, even without FIRREA's vacancy provision, permanent replacements would have to be appointed with the advice and consent of the Senate. If the vacancy provision means only that permanent replacements must be appointed with the Senate's consent, as the government contends, then it means nothing.
For all of the foregoing reasons, the court concludes that the Vacancies Act should be interpreted as authorizing the President to designate an acting officer only when a prior, constitutionally appointed officer dies, resigns, or is sick or absent. As a result, in light of the court's conclusion that Mr. Wall never constitutionally became the Director of OTS, see p. 1193, supra, the court finds that Mr. Martoche's appointment was not authorized by the Vacancies Act.
ii. Did the President have Inherent Authority to Appoint Mr. Martoche Under the Facts Present in this Case?
The FDIC argues that, even if the Vacancies Act did not confer on the President the authority to designate Mr. Martoche, the President has inherent authority to appoint officers and that he properly exercised that authority in this case. FDIC's PI Opposition at 25-29. To accept this argument, the court would need to ignore a prior decision of this Circuit's Court of Appeals as well as the more than 100 years unchallenged use of the Vacancies Act.
In Williams v. Phillips,
The following circumstances, taken together, cause this court to conclude that the appointment of Mr. Martoche was not a proper exercise of whatever limited power the President may possess. First, the government has not argued that any emergency existed beyond the general emergency which exists whenever a regulatory body charged with important functions is left without its primary officer. If this were enough to create an emergency and justify appointments outside the Vacancies Act and the Constitution, the protections afforded by the Act and the Constitution would quickly be lost. Second, if any emergency did exist it was the result not of
Moreover, if the court were to find that the President had the inherent authority to designate Mr. Martoche Acting Director of OTS, then the Vacancies Act would be an unconstitutional limitation on the President's constitutional powers. See Williams, 360 F.Supp. at 1369. The court is not inclined to hold that the Vacancies Act, relied on by all branches of the government for more than 100 years, see Plaintiff's Post-Argument Memorandum in Support of Motion for a Preliminary Injunction at 16-19 (filed Mar. 15, 1990) ("Plaintiff's Post-Argument Memorandum"), is and always has been unconstitutional.
For the foregoing reasons, the court finds that if the President has any inherent authority to appoint temporary officers, his authority is limited and the circumstances which would permit its use were not present in this case. The court therefore concludes that Mr. Martoche was not validly appointed.
c. May Other OTS Officials Exercise the Director's Power to Appoint a Receiver or Conservator Pursuant to Previous Delegations of Authority?
Defendants finally argue that, even if Mr. Martoche cannot exercise the powers of the Director, both Mr. Wall and Mr. Martoche delegated their authority to other officers within OTS. According to OTS, these delegations are past acts which should be recognized under the de facto officer doctrine and therefore the delegatees can now exercise all the powers of the Director.
Assuming these delegations were otherwise proper, each of the Directors could not delegate more authority than he himself had. In light of the court's conclusion that neither Mr. Wall nor Mr. Martoche were ever constitutionally appointed Director of OTS and therefore never exercised their powers excepts as de facto officers, at most they were able to delegate de facto authority. As a result, none of their subordinates' future acts are protected from judicial scrutiny under the de facto officer doctrine. The fact that the delegations are past acts does not bring the delegatees' future acts within the doctrine's protection. Accordingly, because Mr. Martoche cannot constitutionally appoint a receiver or conservator for Olympic, neither can any of his subordinates.
For the foregoing reasons, the court concludes that Olympic has a strong probability of success on its claim that neither Mr. Wall nor Mr. Martoche were constitutionally appointed Director of OTS and that therefore neither they nor any of their subordinates may constitutionally appoint a receiver or conservator for Olympic.
2. Plaintiff's Irreparable Injury.
Despite defendants' arguments, plaintiff will clearly suffer an irreparable injury if its request for injunctive relief is not granted. If a receiver or conservator is appointed, there is a reasonable probability that Olympic will be destroyed or fundamentally altered. See Plaintiff's Post-Argument Memorandum at 25-31.
If OTS and FDIC will not or can not waive the right to assert the de facto officer doctrine in a post-appointment proceeding, Olympic's injury would be compounded because it would permanently lose its right to challenge Mr. Martoche's authority to act as OTS' Director. If a receiver or conservator is appointed and that appointment is then validated under the de facto officer doctrine, Olympic's constitutional claim would be moot and Olympic would forever be barred from challenging the manner in which the government took away its business. Andrade, 729 F.2d at 1497.
3. The Harm to Defendants and to Others.
Defendants do not assert that they will be directly harmed should the court issue the injunction requested by plaintiff. Rather, defendants' harm flows solely from their inability to protect the public interest should the Director be enjoined from taking certain actions. Similarly, the harm to others is solely a harm to the public and, specifically, to the taxpayers. As a result, the portion of the court's analysis focusing on harm to defendants and to others is treated in the next section.
4. The Public Interest.
The government claims that Olympic's "precarious financial condition and the risk of enormous loss to the federal insurance fund" make clear that an injunction would not serve the public interest. OTS' Preliminary Injunction Opposition, at 26. They have argued that, should the court issue the injunction requested by plaintiff, the
Olympic has not asked this court to issue a sweeping injunction prohibiting the Director from taking any action against any S & L. Rather, it has requested that the court enjoin the Director from appointing a receiver or conservator for Olympic until it decides the merits of this action. The court does not believe that Olympic, if given the relief it requests, poses a serious threat to the public interest and the Savings Association Insurance Fund. Certainly there is some danger associated with allowing any at-risk thrift to continue operating. However, a number of facts minimize the risk presented by Olympic. First, OTS has never alleged that Olympic's officers are engaging or have engaged in any affirmative misconduct. Rather, OTS attributes Olympic's poor operating results to a high level of non-earning assets and nominal interest margins. OTS' TRO Opposition at 7. Second, although Olympic has failed to make its operations profitable, it has managed to remain marginally profitable by engaging in certain nonrecurring actions. OTS' TRO Opposition at 7. Third, Olympic's troubles do not appear to be anything new. Although its performance may be deteriorating, OTS' TRO Opposition at 7, both Olympic and the thrifts it acquired between 1982 and 1984 were in poor financial health at the time of the acquisitions. See OTS' TRO Opposition at 7 (although FHLBB approved the mergers proposed by Olympic, it recognized that Olympic's prospects for a return to viability were tenuous). Fourth, Olympic is currently operating—and notwithstanding the PI will remain operating—subject to a number of restrictions on its business operations. See OTS' TRO Opposition at 39 and Exhibit D. These restrictions, previously imposed by OTS, should help to prevent plaintiff (and consequently the SAIF) from suffering any sudden catastrophic losses. Finally, it appears that OTS itself has decided that Olympic does not pose such a serious, immediate threat that it should be subjected to OTS' full range of supervisory powers. On February 12, 1990, the District Director of OTS permitted Olympic to make several categories of loans without individual OTS approval, notwithstanding OTS' normal policy of requiring approval of each new loan. OTS' TRO Opposition at 8.
The court stresses that it is neither closing the door on OTS nor making any finding beyond the specific facts of this case. The court's conclusion that Olympic is entitled to the injunctive relief it requests depends not only on the conclusion that plaintiff has shown a strong likelihood of success on the merits and an irreparable injury. The injunction depends, in the end, on a finding that these factors outweigh the public interest in protecting the Savings Association Insurance Fund against future losses. If conditions at Olympic should change—if, for example, there were a run on the thrift or if OTS discovered that Olympic's managers were looting the thrift's assets—OTS could come to the court, present those facts, and seek to dissolve the preliminary injunction. Contrary to OTS' assertions, OTS' TRO Opposition at 38-39, 42, Olympic has not requested, and this court is not issuing, an order invalidating Mr. Wall and Mr. Martoche's past acts or enjoining OTS from exercising any of its supervisory and regulatory powers other than its power to appoint a receiver or conservator for Olympic until a new Director is properly appointed. Although this may lead to a great deal of litigation and place OTS' operations in some confusion, the clear violation of plaintiff's constitutional rights and the public's interest in
For all of the foregoing reasons, and pursuant to the order issued this date, Olympic's motion for a preliminary injunction is GRANTED. The government's only specific request for bond was in the amount of Olympic's total deposits—approximately $835 million. OTS' PI Opposition at 26-27. This is clearly excessive. Bond is therefore set at $1,000.
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