The opinion of the court was delivered by: Shadur, District Judge.
Federal Savings and Loan Insurance Corporation ("FSLIC") has filed its
Petition under 12 U.S.C. § 1730(k)(2)*fn1 for enforcement of a cease
and desist order (the "Order") issued August 11, 1976 against Glen Ellyn
Savings and Loan Association ("Glen Ellyn"), an institution insured by
FSLIC. For the reasons stated in this memorandum opinion and order,
FSLIC's petition is granted.
In 1976 FSLIC charged Glen Ellyn with numerous violations of federal
and state regulatory provisions applicable to Illinois-chartered,
FSLIC-insured savings and loan associations. Those violations, in FSLIC's
view, were "unsafe or unsound practices" warranting the entry of a cease
and desist order as provided in Section 1730(e). Glen Ellyn chose not to
contest FSLIC's judgment. It consented to entry of the Order, avoiding
the institution of cease-and-desist proceedings under the statute.
Periodic examinations of Glen Ellyn since 1976 have revealed continuing
violations of various provisions of the Order. FSLIC has not responded by
seeking judicial enforcement of the Order. Instead it has engaged in
frequent negotiation and discussion with Glen Ellyn to obtain correction
of the violations—informal means upon which FSLIC typically relies
to seek compliance with a cease-and-desist order. Only in cases where
such efforts repeatedly fail does FSLIC resort to judicial enforcement
proceedings.*fn2 This year the examiner's discovery of violations of ten
of the Order's 26 provisions prompted FSLIC's resort to this Court for
Glen Ellyn offered no testimony at the hearing. It introduced copies of
letters submitted in response to FSLIC's examination reports. Def. Ex.
2-6. While those letters question the existence of some of the violations
identified by the examiners, they acknowledge the accuracy of the
examination reports as to numerous violations and indicate Glen Ellyn's
intent to take appropriate corrective action.
Glen Ellyn's real defense to the Petition is a laches argument
(tendered by an "Addendum to Answer and Affirmative Defenses," filed the
day of this Court's hearing). It contends FSLIC had not sought
enforcement of the Order in the more than eight years since it was agreed
to, a period in which there have been changes in (1) the ownership of
Glen Ellyn's common stock, (2) the composition of Glen Ellyn's board of
directors and (3) Glen Ellyn's management. Glen Ellyn asserts those
changes were predicated, at least in part, on the belief FSLIC would seek
no further enforcement of the Order. Under those circumstances, Glen
Ellyn says, FSLIC should be barred from enforcement by the equitable
doctrine of laches.
FSLIC's Right to Enforcement
In both contractual and statutory terms, FSLIC's right to enforcement
is plain. Glen Ellyn's consent to entry of the Order in 1976-and to its
enforceability thereafter—was unequivocal (Pl. Ex. 1):
Glen Ellyn stipulates and agrees that said Order shall
be deemed to be a "cease-and-desist order which has
become final" as defined in Section 407(q)(1)(A) of
the Act (12 U.S.C. § 1730(q)(1)(A)), that it
fully complies with all requirements of law, and that
the said Order shall become effective upon its
issuance and be enforceable by the FSLIC under the
provisions of Section 407(k)(2) of the Act (
12 U.S.C. § 1730(k)(2)).
Nor does the Order contain any expiration provision. Indeed, Section
1730(e)(2) negates any concept comparable to a "sunset law":
A cease-and-desist order . . . shall remain effective
and enforceable except to such extent as it is
stayed, modified, terminated, or set aside by action
of the Corporation or a reviewing court.
FSLIC itself has declined to take any such action. In March 1980 Glen
Ellyn petitioned FSLIC to terminate the Order. In denying that petition,
Board supervisory agent David J. Kalina*fn4 explained (Ans. Ex. B):
1. As a matter of policy, cease and desist orders will not be
terminated until five years after issuance date.