resolution approving the merger, and the resolution conditionally approved accounting to the merger under the "purchase method" of accounting. In accordance with generally accepted accounting principles ("GAAP"), goodwill arising from the purchase method of accounting for a merger may be amortized over a period of up to 40 years. The complaint further alleges that Schenectady satisfied the conditions specified in the FHLBB resolution, and that Northeast recorded goodwill attributable to the transaction on its books, amortizing it over a 40-year period.
Shortly thereafter, Northeast acquired two other S&Ls: Freedom Federal Savings & Loan Association ("Freedom Federal") of Worcester, Massachusetts, and First Federal Savings & Loan Association ("First Federal") of Boston, Massachusetts. In response to a solicitation for bids, Northeast had submitted to FSLIC on June 10, 1982, a proposal for the acquisition of Freedom Federal. On October 8, 1982, the FHLBB approved the merger and authorized FSLIC to provide Northeast financial assistance in two forms: 1) an FSLIC note in the amount of $ 50 million, in return for $ 50 million in Income Capital Certificates ("ICCs")
issued by Northeast, and 2) cash in an amount equal to the negative net worth of Freedom Federal as shown in Freedom Federal's most recent monthly report to FSLIC. In addition, Northeast and FSLIC entered into a Master Agreement, which set forth the terms of the ICC transaction. The merger of Northeast and Freedom Federal was consummated on October 8, 1982.
It is not alleged in the complaint that the Master Agreement between FSLIC and Northeast made any provision concerning use of the purchase method of accounting or the inclusion of goodwill in capital. The complaint states that the FHLBB resolution approving the merger provided that "the merger shall be accounted for using the purchase method of accounting in accordance with [GAAP]" but that the resolution's definition of pertinent GAAP principles "shall apply only for purposes of . . . the [ICCs], and the Promissory Note issued by the FSLIC in connection [therewith] . . ., and for reports made to the Bank Board and the FSLIC." Complaint, para. 64. By a separate letter, the FHLBB stated that Northeast's use of purchase accounting would be deemed in accordance with GAAP and regulatory capital requirements upon receipt of Northeast's independent accountant's opinion. Complaint, para. 65. Northeast subsequently provided such an opinion, which specified that goodwill would be amortized over a 30-year period.
Northeast entered into a Merger Agreement with First Federal on July 12, 1982. Complaint, para. 68. The FHLBB adopted a resolution approving the merger on October 8, 1982, and Northeast consummated the transaction on that date. Complaint, paras. 49, 69, 70. Unlike the two mergers discussed above, the Northeast/First Federal merger involved no financial assistance from FSLIC.
The FHLBB's resolution approving this transaction stated that "the merger may be accounted for using the purchase method of accounting in accordance with [GAAP]," but that the resolution's definition of pertinent GAAP principles "shall apply only for purposes of . . . reports made to the Bank Board and the FSLIC." Complaint, para. 69. In a separate letter, FHLBB stated that Northeast's use of purchase accounting would be deemed in accordance with GAAP and regulatory capital requirements upon receipt of Northeast's independent accountant's opinion. Complaint, para. 70. Northeast subsequently provided such an opinion, which specified that goodwill would be amortized over a 30-year period. Complaint, para. 70.
In viewing a motion to dismiss, "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). The factual allegations of the complaint must be presumed true and liberally construed in favor of plaintiff. Ramirez de Arellano v. Weinberger, 240 U.S. App. D.C. 363, 745 F.2d 1500, 1506 (D.C. Cir. 1984); 5A C. Wright & A. Miller, Federal Practice and Procedure, § 1357, p. 304 (1990). The plaintiff is entitled to all favorable inferences which may be drawn from those allegations. Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974).
As a threshold matter, defendants contend that this Court lacks subject matter jurisdiction over this cause of action and that jurisdiction over plaintiff's claims lies exclusively in the United States Claims Court. Northeast concedes that this action is, in essence, a suit against the federal sovereign under the standards set forth in Dugan v. Rank, 372 U.S. 609, 10 L. Ed. 2d 15, 83 S. Ct. 999 (1963).
The issue, therefore, is whether this Court, or the Claims Court, can entertain Northeast's suit for "injunctive relief" against the United States.
It is indisputable that this District Court would have jurisdiction over a genuine due process claim that is not, at its essence, a claim for breach of contract. However, where the crux of the complaint rests on an alleged contractual violation, plaintiff is limited by the Tucker Act and its mandate to proceed in Claims Court.
As the Court of Appeals suggested the inquiry a court must make in characterizing a claim, "The classification of a particular action as one which is or is not 'at its essence' a contract action depends both on the source of the rights upon which the plaintiff bases its claims, and upon the type of relief sought (or appropriate)." Megapulse, Inc. v. Lewis, 217 U.S. App. D.C. 397, 672 F.2d 959, 968 (D.C. Cir. 1982). It is clear on the face of the complaint that plaintiff's due process claim seeks to enforce plaintiff's contract. Specifically, the complaint states, "This repudiation and abrogation3 of defendants' contractual promises to Northeast constitute a breach of contract, a taking of Northeast's property without just compensation in violation of the Fifth Amendment to the United States Constitution, and a deprivation of Northeast's property without due process of law in violation of the Fifth Amendment to the United States Constitution." Complaint, para. 1 (emphasis added). The purported contract between plaintiff and the FSLIC and FHLBB is the very source of the rights upon which plaintiff has sued.
Moreover, it is equally clear that the relief plaintiff seeks is not "appropriate" here. The specific performance of an alleged contract between plaintiff and defendants is unavailable because Congress has determined that damages are the only relief available on such claims. See 1976 H.R. Rep. No. 1656, 94th Cong., 2d Sess. 12-13 (1976), U.S. Code Cong & Admin. News, pp. 6121, 6132-33. As the Court of Appeals for this Circuit has explained, "An action against the United States which is at its essence a contract claim lies within the Tucker Act[,] and . . . a district court has no power to grant injunctive relief in such a case." Megapulse, 672 F.2d at 967. This is so even where the plaintiff does not specifically request monetary relief. As then-Judge Scalia noted, "The sole remedy for an alleged breach of contract by the federal government is a claim for money damages . . . in the United States Claims Court under the Tucker Act, 28 U.S.C. § 1491(a)(1) (1982) . . . . We know of no case in which a court has asserted jurisdiction either to grant a declaration that the United States was in breach of its contractual obligations or to issue an injunction compelling the United States to fulfill its obligations." Sharp v. Weinberger, 255 U.S. App. D.C. 90, 798 F.2d 1521, 1523-24 (D.C. Cir. 1986). Thus, a claimant may not avoid the exclusive jurisdiction of the Claims Court simply by framing a complaint to seek nonmonetary relief. See Ingersoll-Rand Co. v. United States, 250 U.S. App. D.C. 412, 780 F.2d 74, 79 (D.C. Cir. 1985). As the legislative history makes clear, "In the Court of Claims Act, Congress created a damage remedy for contract claims with jurisdiction limited to the Court of Claims except in suits for less that $ 10,000. The measure is intended to foreclose specific performance of government contracts." 1976 H.R. Rep. No. 1656, 94th Cong., 2d Sess. 12-13 (1976), U.S. Code Cong. & Admin. News, pp. 6121, 6132-33.
In any event, the injunctive relief requested in this case -- regulatory treatment of goodwill -- cannot be granted because it is contrary to federal law. Plaintiff seeks, in essence, an order permitting plaintiff, and requiring defendants, to violate statutory and regulatory requirements. And even if plaintiff's claims prove to be meritorious, a court may not, based upon a contract, issue an injunction that orders a violation of the law. See, e.g., Texas Co. v. Z & M Independent Oil Co., 66 F. Supp. 957, 963 (N.D.N.Y. 1945), aff'd, 156 F.2d 862 (2d Cir. 1946).
Injunctive relief is also unavailable on plaintiff's claim that the provisions of FIRREA and the OTS capital regulation restricting the inclusion of supervisory goodwill effect a taking. Although plaintiff contends that the relationship between plaintiff and defendant and the factors that impact on that relationship are fluid; that monetary damages may ebb and flow and thus, are difficult to discern; and that plaintiff would be forced to pursue a series of damages suits if the Court did not grant the requested relief; plaintiff's proper remedy is an action for "just compensation" in the United States Claims Court. "The Fifth Amendment does not proscribe the taking of property; it proscribes taking without just compensation." Williamson County Reg'l Planning Comm'n v. Hamilton Bank of Johnson City, 473 U.S. 172, 194, 87 L. Ed. 2d 126, 105 S. Ct. 3108 (1985). Accordingly, the Supreme Court has repeatedly held that "'equitable relief is not available to enjoin an alleged taking of private property for a public use, duly authorized by law, when a suit for compensation can be brought against the sovereign subsequent to a taking.'" United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 127-28, 88 L. Ed. 2d 419, 106 S. Ct. 455 (1985) (quoting Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1016, 81 L. Ed. 2d 815, 104 S. Ct. 2862 (1984)). In fact, the Supreme Court has recently made clear that, as a substantive matter, there has been no taking without just compensation unless a plaintiff has presented a claim for compensation in Claims Court and that takings claims presented to a district court before the Claims Court remedy has been invoked is premature. "'If the government has provided an adequate process for obtaining compensation, and if resort to that process "yields just compensation," then the property owner "has no claim against the Government" for a taking' . . . . For this reason, 'taking claims against the Federal Government are premature until the property owner has availed itself of the process provided by the Tucker Act.'" Preseault v. I.C.C., 494 U.S. 1, 110 S. Ct. 914, 921, 108 L. Ed. 2d 1 (1990) (citations omitted).
Therefore, at best, even if a court were to determine that the FIRREA abrogated the regulatory forbearance allegedly issued to plaintiff, and even if that abrogation effectuated a taking, the remedy to which plaintiff would be entitled is monetary relief. As the Court of Appeals for the Sixth Circuit found in a comparable case, "If [plaintiff] did have a contractual property interest, we believe that the evidence of congressional intent is strong enough to infer that Congress wanted to effect a taking. In the event that this action were determined to be a taking, [plaintiff] would be entitled to compensation, not to equitable relief." Franklin Federal Savings Bank v. Director, Office of Thrift Supervision, 927 F.2d 1332, 1341 (6th Cir. 1991) (emphasis added).
The only question that remains, therefore, is whether a Tucker Act remedy is available. The jurisdiction of the Claims Court is exclusive if the property alleged to have been taken exceeds $ 10,000. See Monsanto, 467 U.S. at 1020. The relief available to plaintiff, if it were to succeed, is considerably more than the $ 10,000 that is required for this Court to be able to exercise concurrent jurisdiction. Moreover, there is no indication that "Congress has in the [FIRREA] withdrawn the Tucker Act grant of jurisdiction to the [Claims Court] to hear a suit involving the [FIRREA] 'founded . . . upon the Constitution.'" Preseault, 110 S. Ct. at 922 (citations omitted) (emphasis in original). Congress did not exhibit the type of "unambiguous intention to withdraw the Tucker Act remedy." Monsanto, 467 U.S. at 1019.
Consequently, this case must be dismissed for lack of subject matter jurisdiction. If plaintiff wishes to litigate its claims, it must seek monetary relief in the United States Claims Court.
For the reasons expressed above, it is hereby
ORDERED that defendants' motion to dismiss is granted; it is
FURTHER ORDERED that this case is dismissed without prejudice to renew in the United States Claims Court; it is
FURTHER ORDERED that plaintiff's motion for summary judgment is denied as moot; it is
FURTHER ORDERED that plaintiff's motion for a preliminary injunction is denied as moot.
IT IS SO ORDERED.