FSLIC v. Ticktin

LOCATION: Unemployment Insurance Office

DOCKET NO.: 87-1865
DECIDED BY: Rehnquist Court (1988-1990)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 490 US 82 (1989)
ARGUED: Feb 27, 1989
DECIDED: Apr 03, 1989

James B. Koch - on behalf of the Respondents
Richard G. Taranto - on behalf of the Petitioner

Facts of the case


Media for FSLIC v. Ticktin

Audio Transcription for Oral Argument - February 27, 1989 in FSLIC v. Ticktin

William H. Rehnquist:

We'll hear argument first this morning in No. 87-1865, Federal Savings and Loan Insurance Corporation v. Ticktin.

Mr. Taranto?

Richard G. Taranto:

Mr. Chief Justice, and may it please the Court.

This case presents the question whether the FSLIC, or FSLIC, as the receiver of an insolvent state-chartered savings and loan has access to Federal court to bring a damages action against directors and officers of the Institution for their violations of duties imposed by Federal as well as state law.

Two jurisdictional statutes are involved: Section 1345 of Title 28 which provides generally for Federal agency jurisdiction in Federal court, and Section 1730(k)(1) of Title 22... of Title 12 which more specifically addresses jurisdiction in cases involving FSLIC.

The court of appeals held that there was no Federal jurisdiction over this case under either of those statutes.

William J. Brennan, Jr.:

Mr. Taranto, do I understand that a new statute has been introduced that would abolish FSLIC?

Richard G. Taranto:

Yes, a new bill has been introduced.

It was introduced last Wednesday, the administration's comprehensive FSLIC bail-out bill.

We sent a letter up to the Court on Friday that attempted to outline some of the provisions that would be... would be relevant.

As of now, of course, the bill is merely proposed and--

William J. Brennan, Jr.:

Were it to be enacted, though, that would end this case, would it not?

Richard G. Taranto:

--It... it may well end this case.

The... the new bill would create a new transition entity that would take the place of FSLIC for all current receiverships and receiverships for the next three years.

That new entity has a special jurisdictional provision which contains no exception to Federal jurisdiction.

We would believe that that would, in fact, solve the jurisdictional problem here, although there may be some argument about that.

This case arose as a result of two dividends declared by Respondents as directors of the Manning Savings and Loan Association, a state-chartered thrift that was insured by FSLIC.

In 1980 Manning's directors declared a dividend of more than $400,000.

The dividend was doubly illegal and it was excessive by more than $300,000 because Manning had insufficient net worth and reserves under the FSLIC's regulations and, therefore, also under state law.

In late 1981 after FSLIC charged Manning... Manning's directors with having violated the Federal requirements, a cease and desist order was entered by a Federal court prohibiting Manning's directors from paying any dividends except in accordance with state law.

In April 1982, FSLIC issued new charges advising Manning's directors that Manning now had operating losses of roughly $300,000 per month and had a negative net worth of more than 2 million... of more than $500,000 which was more than $2 million short of the amount required to maintain its FSLIC insurance.

Despite those charges, Respondents as directors of Manning declared a dividend worth more than $300,000 the following month.

That dividend, like the 1980 dividend, was illegal under both Federal and state law and was, therefore, also a violation of the Federal cease and desist order.

In February 1983, the Federal Home Loan Bank Board found that Manning was insolvent and had incurred substantial dissipation of assets as a result of illegal and unsafe practices.

The Board therefore placed Manning in receivership and appointed FSLIC to be the receiver.

In that capacity, FSLIC brought this suit against Respondents in May 1983.

The complaint, among other things, sought damages under state law for Respondents' breach of their state law fiduciary duties.

In support of the claim, FSLIC alleged that Respondents violated Federal obligations in several ways: by declaring dividends that were illegal under the Federal net worth and reserve requirements, by causing Manning to violate the Federal conflict of interest regulations, and by causing Manning to violate the cease and desist order.

Respondents moved to dismiss for lack of Federal jurisdiction.

The district court found that there was jurisdiction, but certified an interlocutory appeal on the question.