The opinion of the court was delivered by: Campbell, Chief Judge.
Plaintiffs are presently before the court on a motion seeking
the appointment of a receiver.
Since I assumed jurisdiction in this case on January 17, 1966
I have had the benefit of extensive oral argument by the many
able attorneys representing the various parties. Additional
briefs and pleadings, in the main addressed to the present motion
for the appointment of a receiver, have been filed and I have had
the opportunity to review extensively the Peat, Marwick, Mitchell
and Company April 30, 1964 Audit report, which prior to my order
of February 21, 1966 (Transcript of Proceedings, February 21,
1966, p. 24) was filed of record but impounded. On the basis of
this exhaustive review of what conservatively can be
characterized as a most complex and extensive matter — both
factually and legally — I make the following observations in
deciding the pending motion.
When initially making my decision to assume jurisdiction over
this case I was faced with deciding what I acknowledged to be a
difficult, far reaching and close legal issue of first
impression. I refer to the issue of whether or not Illinois
savings and loan depositors or investors enter into an investment
contract and in effect are purchasers of securities within the
meaning and provisions of the Exchange Act. 15 U.S.C. § 78a et
Normally, when making such an important interlocutory decision
without the benefit of some prior judicial authorities,
preferably from our own Seventh Circuit, I have looked with favor
upon motions requesting a § 1292(b) interlocutory appeal.
(Radiant Burners Inc. v. American Gas Association et al.,
207 F. Supp. 771 and 209 F. Supp. 321, Rev. in 320 F.2d 314, 98
A.L.R.2d 228, cert. den. 375 U.S. 929, 84 S.Ct. 330, 11 L.Ed.2d
262.) However, in the instant case I denied defendants' motions
requesting permission to file such an interlocutory appeal. In
denying defendants' motions I explained that my main concern was
the plight of the individual investors. (Transcript of
Proceedings, January 21, 1966, pp. 17-20)
Then, as now, their protection and the expeditious resolution
of all of the issues presently standing in the way of a final and
fair total liquidation of City Savings and Loan Association was
my objective. I was then impressed, as I am now even more
impressed, with what appears to be a confusion in efforts,
possible conflicting interests, and the possible resulting
subjugating of investors' claims to the interests of others. A
final and total resolution and payment of investors' claims
appears long overdue.
Plaintiffs, certainly not by design, by their present motion
for appointment of a receiver place an additional burden and
obstacle in the way of my expediting this matter. The mere
granting of the motion and appointment of a receiver — standing
alone — would, of course, cause no additional delay, for that
matter I believe the converse would result; the resolution of the
cause would most probably be expedited. However, the granting of
the motion would necessarily, and quite properly, serve to permit
defendants the interlocutory appeal heretofore denied them.
(Title 28 U.S.C.A. § 1292(a)(2) The delay I sought to preclude
would thus prove unavoidable.
Accepting this necessary result, delay, albeit procedurally
proper, is inevitable. The main cause for my denying defendants'
earlier motions for interlocutory appeal is therefore no longer
A motion in Federal Court for the appointment of a receiver
should be granted only under the extremist of circumstances. In
Connolly v. Gishwiller, 162 F.2d 428 our Seventh Circuit Court of
Appeals, although affirming the lower court's appointment of a
receiver stated: "It is true, of course, the power to appoint a
receiver is a drastic, harsh and dangerous one and should be
exercised with care and caution". (Connolly p. 435) See also
Mintzer v. Arthur L. Wright Co., 263 F.2d 823; Chambers v.
Blickly Ford Sales, Inc., 2 Cir., 313 F.2d 252.
Also, where as here, state law provides adequate means for
affording sufficient protection of assets, federal courts should
be most hesitant to assert themselves by way of receivership.
Pennsylvania v. Williams, 294 U.S. 176, 55 S.Ct. 380, 79 L.Ed.
841; Fulia v. Warranty Bldg. and Loan Assn., D.C., 5 F. Supp. 952.
Plaintiffs' complaint, briefs and most importantly their
affidavits allege nothing less than fraud on the part of the
present liquidators, those over whom or in lieu of a court
appointed receiver would act. On the basis of plaintiff's
allegations the present liquidators are either corrupt,
inefficient or both. To this extent the circumstances here might
be distinguished from Pennsylvania v. Williams cited above.
However, as is most often the case, these allegations are for the
most part general and not specific. Although possibly susceptible
of proof at an extended hearing or trial, these geneal
allegations do not warrant my granting the extraordinary relief
sought, especially where as here I am in the first instance
proceeding upon legally tenuous jurisdictional grounds. Rather
than compound the legal uncertainty of my rulings I must deny the
present motion for appointment of a receiver. As already stated
this determination is further indicated by the necessary
elimination of what I expressed to have been the overriding
salutary purpose of my prior rulings; the expeditious resolution
of the investors' claims.
Accordingly, I deny plaintiffs' motion for the appointment of
a receiver. Recognizing the consequences of this ruling I do
hereby certify that my order denying this motion "* * * involves
a controlling question of law as to which there is substantial
ground for difference of opinion and that an immediate appeal
from the order may materially advance the ultimate termination of
the litigation * * *" (Title 28 U.S.C. § 1292(b))
Further, on my own motion and for the reasons detailed above I
now certify that my Order of January 17, 1966 assuming
jurisdiction over this case and in effect holding that
withdrawable capital shares in a savings and loan association are
securities within the meaning of the Exchange Act also "* * *
involves a controlling question of law as to which there is
substantial ground for difference of opinion and that an
immediate appeal from the order may materially advance the
ultimate termination of the litigation * * *". (Title 28 U.S.C. § 1292(b))
Pending resolution of what I anticipate will be immediately
filed appeals, this court in no way restrains the liquidation
proceedings presently pending or hereafter commenced in the State
Court. Should, however, this court be sustained in its
jurisdictional ruling those ...