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July 24, 1990

THE UNITED STATES OF AMERICA, THE OFFICE OF THRIFT SUPERVISION, and its Director, TIMOTHY RYAN, and his successor in office, Defendants

Suzanne B. Conlon, United States District Judge.

The opinion of the court was delivered by: CONLON


 This action is a product of the savings and loan crisis. Plaintiff Century Federal Savings Bank ("Century") claims that new minimum capital requirements promulgated by defendant Office of Thrift Supervision ("OTS") authorize defendant Timothy Ryan, as OTS Director ("the OTS director") to place Century in receivership. On July 12, 1990, Century filed a complaint seeking injunctive relief. Century immediately moved for a temporary restraining order and a preliminary injunction to protect Century from receivership until the court reaches a final decision on the merits.

 I. Background

 A. Enactment of FIRREA

 On August 9, 1989, Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101-73, 103 Stat. 183 ("FIRREA"). In passing FIRREA, Congress modified the regulatory framework of the thrift industry. Congress abolished the Federal Home Loan Bank Board ("the Bank Board") and the Federal Savings and Loan Insurance Corporation ("FSLIC"), FIRREA § 401, 103 Stat. 354, and established OTS. FIRREA § 101, 103 Stat. 187. FIRREA authorizes the OTS director to promulgate

uniformly applicable capital standards for savings associations.

 FIRREA § 301, 12 U.S.C. § 1464(t)(1)(A).

 OTS promulgated new regulations prescribing minimum capital standards on November 7, 1989, and the regulations became effective on December 7, 1989. 12 C.F.R. § 567. The OTS director is authorized to appoint a conservator or receiver ex parte and without notice if, in his opinion, a savings and loan association fails to maintain the minimum capital level. 12 U.S.C. §§ 1464(d)(2)(A) and (E).

 B. Formation of Century

 Century was formed in August 1984, when the Bank Board transferred the assets of the insolvent Century Savings and Loan Association, a state chartered mutual savings and loan association, to Century. Century was established under a Federal Stock Charter granted by Bank Board Resolution No. 84-448 dated August 24, 1984 ("the resolution"). At the time Century was formed, liability from its predecessor's savings accounts exceeded the value of transferred assets. However, the Bank Board permitted thrift purchasers like Century to use, where appropriate, "purchase method" accounting under Generally Accepted Accounting Principles ("GAAP") to account for the acquisitions. The purchaser of an insolvent savings and loan association was permitted to record "goodwill" as an asset on the association's books, in the amount that the market value of the acquired institution's liabilities exceeded the market value of its assets.

 The resolution permitted Century to amortize supervisory goodwill over a 35-year period using a straight-line method. The resolution stated,

RESOVLVED [sic] FURTHER, That for purposes of reporting to the Board, the use of push-down accounting is approved, and Century may amortize the value of any intangible asset resulting from the accounting for the purchase over a period not to exceed 35 years by the straight-line method.

 Complaint, Ex. A at 3. Under FIRREA, only limited "qualifying" amounts of goodwill may be included for purposes of computing the purchaser's capital. These amounts decrease and are phased out in five years. If FIRREA had been in place when Century was formed, Century would have been legally insolvent from its inception. OTS does not dispute that Century is a stable, conservatively managed institution. However, Century does not have sufficient capital to satisfy FIRREA minimum capital standards.

 On July 3, 1990, a supervisory OTS team advised Century's board of directors that Century was insolvent due to regulations preventing consideration of the supervisory goodwill granted by the Bank Board. OTS informed Century that it must meet the increased capital requirements. In the alternative, OTS demanded that Century sign a consent agreement surrendering operating authority to OTS or face receivership and liquidation by the Resolution Trust Corporation.

 Century maintains that the resolution and Century's charter agreement contractually obligated the United States to consider the full amount of supervisory goodwill as capital even under the new regulations. Century alleges that it will suffer irreparable harm if a receiver is appointed. Century requests the court to enjoin OTS from placing Century in ...

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