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FIRST NATL. BANK OF CHICAGO v. STEINBRINK

February 9, 1993

FIRST NATIONAL BANK OF CHICAGO, as Trustee of the Institutional Real Estate Fund F, Petitioner,
v.
STEPHEN R. STEINBRINK, Acting Comptroller of the Office of the Comptroller of the Currency of the United States, and THE OFFICE OF THE COMPTROLLER OF THE CURRENCY OF THE UNITED STATES, an agency of the United States, Respondents.



The opinion of the court was delivered by: JAMES B. ZAGEL

 MEMORANDUM OPINION AND ORDER

 First National Bank of Chicago ("Bank"), as Trustee of the Institutional Real Estate Investment Fund F ("Fund F"), has petitioned this court to review a "letter ruling" issued on May 7, 1992, by Jimmy F. Barton, Deputy Comptroller, Multinational Banking. Specifically, the Bank seeks a declaratory judgment as to the propriety of the May 7 letter and the proper calculation of Fund F participants' matured redemption requests. Stephen R. Steinbrink, Acting Comptroller, and the Office of the Comptroller of the Currency of the United States ("OCC") move this Court to dismiss the petition for lack of subject matter jurisdiction. For the reasons set forth below, OCC's motion to dismiss is granted.

 The Comptroller has initiated administrative proceedings pursuant to 12 U.S.C. § 1818(b)(1). On May 5, the Comptroller filed a Notice of Charges, which was subsequently amended, requesting that a cease and desist order be issued against the Bank for violations of 12 C.F.R. §§ 9.18, 92a and Part 9 in its administration of Fund F participants' withdrawal requests. The Comptroller seeks additional relief in the form of an order directing the Bank to make up any shortfall in the Fund attributable to the Bank's violations and the resulting delay in payment of matured withdrawal requests.

 Once such an administrative enforcement proceeding is initiated, a district court's jurisdiction is defined by section 1818(i) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Section 1818 states:

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

 12 U.S.C. § 1818(i)(1) (1988) (emphasis added). Despite this general withdrawal of jurisdiction, a district court can: (1) set aside, limit, or suspend temporary cease and desist and suspension orders issued pending completion of the administrative proceedings if petitioned within 10 days of service of the order; *fn1" (2) enforce temporary cease and desist orders issued when violations of such orders are threatened; *fn2" and (3) enforce outstanding notices and orders such as subpoenas in connection with proceedings, examinations, and investigations initiated by OCC. *fn3" Judicial review of final orders, however, falls strictly within the province of the "court of appeals for the circuit in which the home office of the depository institution is located, or in the United States Court of Appeals for the District of Columbia Circuit." 12 U.S.C. § 1818(h)(2) (1988).

 The clear import of these provisions in § 1818 is to effectuate an exacting administrative mechanism "through which the Comptroller may curtail unsafe banking practices or legal violations through cease and desist orders that are reviewable in the circuit courts and, where necessary, may provide interim security through temporary orders that may be challenged or enforced through the district courts." Groos Nat'l Bank v. Comptroller, 573 F.2d 889, 894 (5th Cir. 1978). Moreover, section 1818 provides the exclusive mechanism for proceedings brought under this section. "'The clarity of the congressional preclusion of review' in § 1818(i)(1), coupled with the 'meaningful and adequate opportunity for judicial review' by the court of appeals following a final administrative order, provides 'clear and convincing evidence that Congress intended to deny the District Court jurisdiction to review and enjoin the [] ongoing administrative proceedings.'" Resolution Trust Corp. v. Ryan, 801 F. Supp. 1545, 1550 (S.D. Miss. 1992) (quoting Board of Governors of Fed. Reserve System v. MCorp Fin., Inc., 116 L. Ed. 2d 358, 112 S. Ct. 459, 466 (1991)).

 To date, no temporary cease and desist order has issued, and the hearing originally scheduled has been held in abeyance. Accordingly, none of the three exceptions to the withdrawal of jurisdiction from the district court has been triggered. The Bank, however, asserts two additional bases for this Court's jurisdiction over its petition for review. First, the Bank argues that a letter written by the Deputy Comptroller to the CEO of the Bank on May 7, 1992, after the OCC filed the Notice of Charges, constitutes an "independent letter ruling ripe for judicial review." Second, the Bank argues that this Court can review the May 7 letter under the Leedom v. Kyne exception to § 1818(i) withdrawal statute. Leedom v. Kyne, 358 U.S. 184, 3 L. Ed. 2d 210, 79 S. Ct. 180 (1958).

 This Court "is not bound to accept as true the allegations of the complaint which tend to establish jurisdiction where a party properly raises a factual question concerning the jurisdiction of the district court to proceed with the action." Grafon Corp. v. Hausermann, 602 F.2d 781, 783 (7th Cir. 1979). The allegations in the complaint must be considered in conjunction with all other evidence submitted on the issue of subject matter jurisdiction. Id. Furthermore, any conflict in the evidence submitted must be viewed in light of the fact that the party invoking jurisdiction carries the ultimate burden of presenting "competent [factual] proof" of proper subject matter jurisdiction. Id.

 With respect to the independent letter ruling argument, the issue before this Court is not whether the May 7 letter constitutes a "ruling," but whether the letter constitutes a "final agency action." The letter qualifies as a final agency action if it: (1) contains definitive statements as opposed to tentative or informal statements or a ruling by a subordinate official; (2) affords sanctions or penalties for noncompliance; (3) has a direct and immediate impact on the petitioners' day-today business; and (4) requires immediate compliance such that petitioner is faced with choosing between costly compliance and sanctions for noncompliance. Abbott Labs. v. Gardner, 387 U.S. 136, 151-53, 87 S. Ct. 1507, 18 L. Ed. 2d 681 (1967).

 The Bank argues that the May 7 letter is a final agency action because its "definitive" rejection of the Bank's proposed April 30 distribution plan prevented administration of the Fund. The parties essentially argue over semantics. The critical fact weighing in favor of the Bank's interpretation is that the letter withholds permission to proceed with its distribution plan and simultaneously requests that the Bank's CEO acknowledge in writing its intent to comply with the OCC's interpretation of its regulations. The Seventh Circuit held that this Court properly exercised jurisdiction over the Bank's first petition for review because (1) the July 17, 1990 letter refused permission, not advice, to "embark[] on a controversial course of action" (2) "with no practical opportunity to obtain judicial interpretation of the regulation . . . [requiring the Bank] to fold its tent in the face of the Comptroller's disapproval." First Nat'l Bank of Chicago v. Comptroller, 956 F.2d 1360, 1364-65 (7th Cir. 1992) ("First Nat'l I").

 First Nat'l I, however, does not conclusively render the May 7 letter, in this case, a final agency action and, consequently, does not automatically establish subject matter jurisdiction over the Bank's second petition. The Bank's second petition and the circumstances surrounding its filing are fundamentally different from the first petition. First, the Deputy Comptroller sent the May 7 letter after the commencement of administrative enforcement proceedings and discussed one of the issues specifically pending in those proceedings. Once administrative proceedings have commenced for a cease and desist order under § 1818(b)(1), the district court's jurisdiction is governed by the limitations imposed by the statute. Second, although the OCC requests stringent compliance with the May 7 letter, the "definitive" nature of the OCC's position is diminished by the Deputy Comptroller's repeated reference to the letter as a "guide" intended to respond to the Bank's proposed distribution plan and to "reiterate [the OCC's] understanding as to how distribution of the Fund's assets should be administered." Third, the Bank's failure to identify any sanctions or penalties threatened for noncompliance with the Deputy Comptroller's requests undermines the Bank's suggestion that it must "fold its tent" in response to the Comptroller's disapproval. *fn4" The letter precludes neither implementation of the April 30 plan nor submission of an alternate distribution plan for consideration by the OCC. *fn4"

 In fact, the Bank's written status report filed on January 8, 1993, reveals that the Bank submitted an alternate plan to the OCC and undertook to make an interim distribution of fractional interests in real estate on January 15, 1993, to Fund F participants with matured redemption requests. *fn5" For the same reasons it was wrong to challenge the May 7 letter here, the Bank was right to ignore the May 7 letter. For all practical purposes, it was nothing more than a piece of paper. The Deputy Comptroller merely employed a threatening tactic often seen in private litigation, which ordinarily should be beneath the dignity of the government. The letter was artfully crafted to intimidate a regulated bank into doing something which the OCC was unwilling to order, and it is not surprising that the OCC was unwilling to order such action. The OCC's position in the May 7 letter is based on flawed economics and ignores that the nature, worth, and marketability of fractional interests in property is fundamentally different from ...


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