unforeseen circumstances, but of FIRREA's unconstitutional attempt to appoint Mr. Wall as OTS's initial Director. The Constitution surely is not served if its avoidance creates in the President powers which he otherwise would not have. Third, unlike the situation present in Williams, the Vacancies Act does generally apply to vacancies in OTS. Where Congress has delegated to the President limited power to fill the kind of vacancy at issue, and where that power was not sufficient to permit the attempted designation, the Court should not broaden Congress' delegation by invoking an undefined and generally unrecognized Presidential power. For these reasons, the court believes it would be improper under Williams to find that the President's designation of Mr. Martoche was a permissible exercise of his inherent authority.
Moreover, if the court were to find that the President had the inherent authority to designate Mr. Martoche Acting Director of OTS, then the Vacancies Act would be an unconstitutional limitation on the President's constitutional powers. See Williams, 360 F. Supp. at 1369. The court is not inclined to hold that the Vacancies Act, relied on by all branches of the government for more than 100 years, see Plaintiff's Post-Argument Memorandum in Support of Motion for a Preliminary Injunction at 16-19 (filed Mar. 15, 1990) ("Plaintiff's Post-Argument Memorandum"), is and always has been unconstitutional.
For the foregoing reasons, the court finds that if the President has any inherent authority to appoint temporary officers, his authority is limited and the circumstances which would permit its use were not present in this case. The court therefore concludes that Mr. Martoche was not validly appointed.
c. May Other OTS Officials Exercise the Director's Power to Appoint a Receiver or Conservator Pursuant to Previous Delegations of Authority?
Defendants finally argue that, even if Mr. Martoche cannot exercise the powers of the Director, both Mr. Wall and Mr. Martoche delegated their authority to other officers within OTS. According to OTS, these delegations are past acts which should be recognized under the de facto officer doctrine and therefore the delegatees can now exercise all the powers of the Director.
Assuming these delegations were otherwise proper, each of the Directors could not delegate more authority than he himself had. In light of the court's conclusion that neither Mr. Wall nor Mr. Martoche were ever constitutionally appointed Director of OTS and therefore never exercised their powers excepts as de facto officers, at most they were able to delegate de facto authority. As a result, none of their subordinates' future acts are protected from judicial scrutiny under the de facto officer doctrine. The fact that the delegations are past acts does not bring the delegatees' future acts within the doctrine's protection. Accordingly, because Mr. Martoche cannot constitutionally appoint a receiver or conservator for Olympic, neither can any of his subordinates.
For the foregoing reasons, the court concludes that Olympic has a strong probability of success on its claim that neither Mr. Wall nor Mr. Martoche were constitutionally appointed Director of OTS and that therefore neither they nor any of their subordinates may constitutionally appoint a receiver or conservator for Olympic.
2. Plaintiff's Irreparable Injury.
Despite defendants' arguments, plaintiff will clearly suffer an irreparable injury if its request for injunctive relief is not granted. If a receiver or conservator is appointed, there is a reasonable probability that Olympic will be destroyed or fundamentally altered. See Plaintiff's Post-Argument Memorandum at 25-31.
OTS contends that it will get fair market value for any assets sold and that therefore Olympic will not be harmed by liquidation. OTS' PI Opposition at 25-26. However, this argument ignores two important considerations. First, receiving the fair market value for a business' assets is not necessarily adequate; the destruction of the business is itself an irreparable injury. See, e.g., Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 585, 72 S. Ct. 863, 96 L. Ed. 1153 (1952) (seizure and government operation of ongoing business were bound to result in damages of such a nature as to be difficult, if not incapable, of measurement); WMATA v. Holiday Tours, 559 F.2d 841, 843 (D.C.Cir. 1977) (destruction of a business is an irreparable injury).
Olympic's owners have not chosen to liquidate the thrift, and the government has no right to impose this choice upon it. The fact that Olympic may soon fail even without government intervention does not transform its immediate destruction at OTS' hands into an insignificant intrusion. As the Court of Appeals has made clear, one is injured when the government improperly takes away a right, whether or not the end result is inevitable. See Andrade, 729 F.2d at 1494-96. Second, if OTS agrees not to assert the de facto officer doctrine in a post-appointment challenge, it is highly unlikely that the receiver or conservator could get fair market value for Olympic's assets. Any possibility that this court would order OTS to undo the transactions entered into by the receiver or conservator would increase the level of uncertainty associated with any sale and ensure that any buyer would discount the price he would otherwise pay for Olympic's assets.
If OTS and FDIC will not or can not waive the right to assert the de facto officer doctrine in a post-appointment proceeding, Olympic's injury would be compounded because it would permanently lose its right to challenge Mr. Martoche's authority to act as OTS' Director. If a receiver or conservator is appointed and that appointment is then validated under the de facto officer doctrine, Olympic's constitutional claim would be moot and Olympic would forever be barred from challenging the manner in which the government took away its business. Andrade, 729 F.2d at 1497.
This additional injury -- the permanent loss of the right to challenge the constitutionality of Mr. Martoche's appointment and authority to regulate Olympic -- renders FIRREA's judicial review provision inadequate.
3. The Harm to Defendants and to Others.
Defendants do not assert that they will be directly harmed should the court issue the injunction requested by plaintiff. Rather, defendants' harm flows solely from their inability to protect the public interest should the Director be enjoined from taking certain actions. Similarly, the harm to others is solely a harm to the public and, specifically, to the taxpayers. As a result, the portion of the court's analysis focusing on harm to defendants and to others is treated in the next section.
4. The Public Interest.
The government claims that Olympic's "precarious financial condition and the risk of enormous loss to the federal insurance fund" make clear that an injunction would not serve the public interest. OTS' Preliminary Injunction Opposition, at 26. They have argued that, should the court issue the injunction requested by plaintiff, the court will subject S & L depositors, the thrift industry, and the nation's entire financial system to extraordinary and unreasonable risks. FDIC's TRO Opposition at 34.
Olympic has not asked this court to issue a sweeping injunction prohibiting the Director from taking any action against any S & L. Rather, it has requested that the court enjoin the Director from appointing a receiver or conservator for Olympic until it decides the merits of this action. The court does not believe that Olympic, if given the relief it requests, poses a serious threat to the public interest and the Savings Association Insurance Fund. Certainly there is some danger associated with allowing any at-risk thrift to continue operating. However, a number of facts minimize the risk presented by Olympic. First, OTS has never alleged that Olympic's officers are engaging or have engaged in any affirmative misconduct. Rather, OTS attributes Olympic's poor operating results to a high level of non-earning assets and nominal interest margins. OTS' TRO Opposition at 7. Second, although Olympic has failed to make its operations profitable, it has managed to remain marginally profitable by engaging in certain nonrecurring actions. OTS' TRO Opposition at 7. Third, Olympic's troubles do not appear to be anything new. Although its performance may be deteriorating, OTS' TRO Opposition at 7, both Olympic and the thrifts it acquired between 1982 and 1984 were in poor financial health at the time of the acquisitions. See OTS' TRO Opposition at 7 (although FHLBB approved the mergers proposed by Olympic, it recognized that Olympic's prospects for a return to viability were tenuous). Fourth, Olympic is currently operating -- and notwithstanding the PI will remain operating -- subject to a number of restrictions on its business operations. See OTS' TRO Opposition at 39 and Exhibit D. These restrictions, previously imposed by OTS, should help to prevent plaintiff (and consequently the SAIF) from suffering any sudden catastrophic losses. Finally, it appears that OTS itself has decided that Olympic does not pose such a serious, immediate threat that it should be subjected to OTS' full range of supervisory powers. On February 12, 1990, the District Director of OTS permitted Olympic to make several categories of loans without individual OTS approval, notwithstanding OTS' normal policy of requiring approval of each new loan. OTS' TRO Opposition at 8.
The court stresses that it is neither closing the door on OTS nor making any finding beyond the specific facts of this case. The court's conclusion that Olympic is entitled to the injunctive relief it requests depends not only on the conclusion that plaintiff has shown a strong likelihood of success on the merits and an irreparable injury. The injunction depends, in the end, on a finding that these factors outweigh the public interest in protecting the Savings Association Insurance Fund against future losses. If conditions at Olympic should change -- if, for example, there were a run on the thrift or if OTS that Olympic's managers were looting the thrift's assets -- OTS could come to the court, present those facts, and seek to dissolve the preliminary injunction. Contrary to OTS' assertions, OTS' TRO Opposition at 38-39, 42, Olympic has not requested, and this court is not issuing, an order invalidating Mr. Wall and Mr. Martoche's past acts or enjoining OTS from exercising any of its supervisory and regulatory powers other than its power to appoint a receiver or conservator for Olympic until a new Director is properly appointed. Although this may lead to a great deal of litigation and place OTS' operations in some confusion, the clear violation of plaintiff's constitutional rights and the public's interest in protecting the Constitution outweigh these harms to the public interest.
For all of the foregoing reasons, and pursuant to the order issued this date, Olympic's motion for a preliminary injunction is GRANTED. The government's only specific request for bond was in the amount of Olympic's total deposits -- approximately $ 835 million. OTS' PI Opposition at 26-27. This is clearly excessive. Bond is therefore set at $ 1,000.
DATE: March 21, 1990
ORDER -- March 21, 1990, Filed
For the reason set forth in the Memorandum Opinion issued this date, it hereby is
ORDERED, that plaintiff's motion for a preliminary injunction is GRANTED. Neither the Acting Director of OTS nor any other officer at OTS may appoint a receiver or conservator for Olympic until a new Director is constitutionally appointed. Bond is set at $ 1,000.