Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.


United States District Court, Northern District of Illinois, E.D

November 13, 1984


The opinion of the court was delivered by: Shadur, District Judge.

                             MEMORANDUM OPINION
                                 AND ORDER

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 enforcement.*fn3

During this Court's October 5, 1984 evidentiary hearing FSLIC presented the testimony of Larry E. Ferries ("Ferries"), the Federal Home Loan Bank Board ("Board") examiner who conducted the 1984 examination. Ferries listed and explained the multiple violations of the Order reflected in the examination report. FSLIC also submitted copies of reports covering the preceding three years' examinations.

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.

2. The Board would usually require a record of no violations for at least two consecutive examinations immediately preceding the termination.*fn5 Neither of those conditions had been met in 1980, and the second has yet to be. Absent some specific action to terminate by FSLIC, the Order thus remains in effect and subject to enforcement at FSLIC's discretion.

That conclusion is buttressed by the language of Section 1730(k)(2), which says in so many words (and without any qualifying language) FSLIC "in its discretion" may seek enforcement in the courts. That discretionary delegation is reflective of Congress' aim in creating the cease-and-desist powers (S.Rep. No. 1482, 89th Cong. 2d Sess., reprinted in 1966 U.S.Code Cong. & Ad.News 3532, 3537-38 (hereafter cited "S.Rep. at—")):

  to provide the federal agencies supervising savings
  and loan associations with "additional flexible and
  effective supervisory powers" to supplement existing
  remedies that had proved "too drastic for use in many
  cases" as well as "too cumbersome to bring about
  prompt correction [when] promptness is very often
  vitally important."

And such vesting of discretion is consistent with the general doctrine that an administrative agency's special knowledge and expertise in the areas of its jurisdiction command judicial respect for the agency's choices as to how it will exercise its remedial powers. NLRB v. Gissell Packing Co., 395 U.S. 575, 612 n. 32, 89 S.Ct. 1918, 1939 n. 32, 23 L.Ed.2d 547 (1969).


Faced with such an uncontrovertible showing of FSLIC's power to obtain enforcement, Glen Ellyn is compelled to fall back on a laches defense. Surprisingly the availability of such a defense to bar enforcement of an FSLIC cease-and-desist order appears to be a question of first impression.

Glen Ellyn does not really support its position with reasoning or authority. Instead it simply asserts enforcement of the Order at this late date would be fundamentally unfair (R. Mem. 9-10):

  Petitioner may not have it both ways. If the
  violations are as severe and serious as alleged,
  Petitioner should have, in the discharge of its duties
  as establish[ed] by Congress, brought suit long ago to
  enforce the "cease and desist order." If, on the other
  hand, as Respondent contends, the violations, if any,
  are minor, clerical and inevitable, the action of the
  Petitioner is not only barred by laches but is an
  abuse of authority.

FSLIC, by contrast, offers three arguments for the proposition that laches is not an available defense:

1. Nothing in the statute under which FSLIC operates contemplates the effective termination of a cease-and-desist order by a district court presiding over an enforcement proceeding.

2. Case law involving other governmental agencies indicates laches is no defense to agency enforcement of an otherwise valid order.

3. Laches is not appropriate in the circumstances of this case. Those contentions will be addressed in turn.

1. Statutory Provisions

Section 1730(k)(2), after authorizing FSLIC's resort to a federal district court for enforcement of a final cease-and-desist order, goes on to say:

  [E]xcept as otherwise provided in this section no
  court shall have jurisdiction to affect by injunction
  or otherwise the issuance or enforcement of any notice
  or order under this section, or to review, modify,
  suspend, terminate or set aside any such order or

Section 1730(j)(2) confers such jurisdiction in the course of judicial review by courts of appeal of cease-and-desist orders issued after a hearing before FSLIC:

  Any party to the proceeding, or any person required by
  an order issued under this section to cease and desist
  from any of the violations or practices stated
  therein, may obtain a review of any order, served
  pursuant to paragraph (1) of this

  subsection (other than an order issued with the
  consent of the institution or the director or officer
  or other person concerned, or an order issued under
  subsection (h)(1) of this section), by filing in the
  court of appeals of the United States for the circuit
  in which the principal office of the institution is
  located, or in the United States Court of Appeals for
  the District of Columbia Circuit, within thirty days
  after the date of service of such order, a written
  petition praying that the order of the Corporation be
  modified, terminated, or set aside. . . . Upon the
  filing of such petition, such court shall have
  jurisdiction, which upon the filing of the record
  shall, except as provided in the last sentence of said
  paragraph (1), be exclusive, to affirm, modify,
  terminate, or set aside, in whole or in part, the
  order of the Corporation.

No comparable statutory provision deals in terms with orders entered by consent.

Were this Court to pass upon the laches defense, FSLIC argues, it effectively would have reviewed or even "terminated" the Order—something it has no jurisdiction to do under Section 1730(k)(2) and Section 1730(j)(2). There is perhaps some surface plausibility to drawing a negative inference from the absence of a specific statutory provision as to consent orders that would parallel the last-quoted sentence of Section 1730(j)(2) (limited as it is to orders entered after hearing). But on analysis that contention proves too much.

Sections 1730(j)(2) and 1730(k)(2) clearly reflect the congressional intention that an enforcement proceeding should not become the occasion for second guessing FSLIC's judgment in issuing the Order in the first place. But that cannot mean a district court presiding over an enforcement proceeding is nothing more than a rubber stamp—or more accurately, a strong arm.*fn6 Section 1730(k)(2) provides, after all, that FSLIC may "apply to the United States district court . . . for enforcement" (emphasis added). To the extent such an application is opposed on an equitable ground that does not go to the propriety or effectiveness of the order itself, but only to the question of its enforceability, the district court in the proper exercise of its jurisdiction under Section 1730(k)(2) must address them.

Glen Ellyn's laches defense calls on this Court to determine whether a fundamental equitable doctrine is applicable to and bars enforcement of an otherwise valid cease-and-desist order. Jurisdiction to entertain FSLIC's enforcement petition must embrace the power to make that decision.*fn7

2. Case Law

FSLIC cites numerous cases as establishing laches "cannot be asserted against the United States in its sovereign capacity to enforce a public right or to protect the public interest." United States v. Arrow Transportation Co., 658 F.2d 392, 394 (5th Cir. 1981). As the Supreme Court explained in Costello v. United States, 365 U.S. 265, 281, 81 S.Ct. 534, 543, 5 L.Ed.2d 551 (1961):

  The reason underlying the principle, said Mr. Justice
  Story, is "to be found in the great public policy of
  preserving the public rights, revenues, and property
  from injury and loss, by the negligence of public
  officers." United States v. Hoar, 26 Fed.Cas. 329, 330
  (No. 15, 373).

What is at stake here, of course, is not precisely "preserving the public rights, revenues, and property from injury and loss." S.Rep. at 3538 has rather cast the policy FSLIC serves as one "to make sure our banks and savings and loan associations . . . continue to serve the Nation effectively and well."

Although direct authority as to FSLIC is lacking, there are analogous precedents that suggest laches may be a potentially available defense here. In NLRB v. Pool Manufacturing Co., 339 U.S. 577, 579-82, 70 S.Ct. 830, 831-33, 94 L.Ed. 1077 (1950), for example, the Supreme Court considered whether NLRB's delay of more than two years in seeking enforcement of a cease-and-desist order gave rise to a laches defense. In the course of its analysis (id. at 580-81, 70 S.Ct. at 832, citations omitted) the Court spoke in terms that might well be used to describe FSLIC's supervisory authority over insured savings and loan associations:

  The Board is of course charged with primary
  responsibility in effectuating the policies of the
  [National Labor Relations] Act. It has determined that
  those policies are advanced in some cases by resorting
  to the processes of negotiation with the employer
  rather than the compulsion, as well as the trouble and
  expense, of an enforcement decree. . . . In some cases
  delay in enforcement may be helpful in reaching an
  immediate solution of the problem; in others,
  exhaustion of negotiation techniques before a decree
  is requested may consume many months after the Board's
  order and before such techniques fail. We are of the
  opinion that a strict judicial time limitation of the
  duration presented in the instant case would frustrate
  the deliberate purpose of Congress in permitting, but
  not requiring, resort to an enforcement decree. . . .
  We must not forget that the "question whether the
  settlement [with the employer] shall be accepted as
  definitive is for the Board to decide. . . ." . . . .
  The employer, who could have obtained review of the
  Board order when it was entered . . . is hardly in a
  position to object. . . .

On that reasoning, the Court concluded laches did not under the circumstances bar enforcement of the NLRB order, though it specifically reserved decision on the question (id. at 582, 70 S.Ct. at 833):

  whether a period of delay through its length alone may
  mature into a denial of an enforcement decree or make
  necessary the adduction of additional evidence.

Pool's failure to reject laches as a matter of law at least implies the availability of such a defense if the facts are right.

Costello provides less comfort to Glen Ellyn, for that case rehearsed the proposition that laches is not available against the sovereign. But the Court did not invoke the rule in upholding the government's right to preserve denaturalization proceedings against an individual for an offense that had occurred 27 years earlier (365 U.S. at 282, 81 S.Ct. at 543):

  None of the cases in this Court considered the
  question of the application of laches in a
  denaturalization proceeding. However, even if we
  assume the applicability of laches, we think that the
  petitioner failed to prove both of the elements which
  are necessary to a recognition of the defense. Laches
  requires proof of (1) lack of diligence by the party
  against whom the defense is asserted, and (2)
  prejudice to the party asserting the defense.

Again the Court held the defense had not been made out in the circumstances of the case.

Pool and Costello, then, do not necessarily foreclose Glen Ellyn's laches defense.*fn8 This Court will therefore take a leaf from the Costello book and assume arguendo the possibility such a defense could lie. Even if so, however, the cases clearly indicate how formidable a hurdle Glen Ellyn must surmount to prevail on such a defense. It must not only show lack of diligence by FSLIC and prejudice to itself; it must also overcome the substantial public policy favoring FSLIC discretion.

3. Propriety of Laches in the Circumstances

At last this opinion arrives at the merits (more accurately, the lack of merit) of Glen Ellyn's assertion of laches. It has scarcely proved worth the trip, for Glen Ellyn plainly cannot make out the defense in the circumstances of the present case. Even if it were assumed granting the Petition after eight years would prejudice Glen Ellyn,*fn9 no basis exists for charging FSLIC with lack of diligence as to the Order. In denying Glen Ellyn's 1980 petition for termination, FSLIC noted recurring violations of the Order. Each of the four examination reports since then has done the same. In each instance FSLIC sought correction of the violations, as Glen Ellyn's letters in response to the examination reports implicitly acknowledge.

Essentially Glen Ellyn argues for a rule that would force the administering agency to hale the offending institution into court for every violation (or at least material violation), rather than pursuing less formal means, on peril of losing the right to enforce a consensual cease-and-desist order. That kind of premium on litigiousness cannot represent sound public policy generally. It does not do so here, in part because it would subvert Congress' announced purposes (quoted earlier in this opinion) to provide the savings and loan regulatory agencies with flexible and effective supervisory powers.


In sum (1) FSLIC is entitled to judicial enforcement of the Order and (2) Glen Ellyn cannot make out a defense of laches. Accordingly FSLIC's Petition is granted. Glen Ellyn is ordered to comply with the provisions of the Order.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.