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GIBRALTER SAV. v. RYAN

July 25, 1991

GIBRALTER SAVINGS, Plaintiff,
v.
TIMOTHY RYAN, Director, Office of Thrift Supervision, et al., Defendants



The opinion of the court was delivered by: GASCH

 OLIVER GASCH, SENIOR UNITED STATES DISTRICT JUDGE

 Gibraltar Savings ("Gibraltar") is a state-chartered, federally-insured savings association that is headquartered in Beverly Hills, California. Gibraltar challenges an order of the Director of the Office of Thrift Supervision ("OTS") that appointed a receiver for the institution. The two named defendants, OTS and the Resolution Trust Corporation ("RTC"), have filed motions for summary judgment. The motions are ripe for decision by the Court.

 I. BACKGROUND

 On March 30, 1989, the Federal Home Loan Bank Board ("Bank Board") appointed the Federal Savings and Loan Insurance Corporation ("FSLIC") conservator of Gibraltar. The reasons given by the Bank Board for the appointment of a conservator were that the institution "has incurred substantial dissipation of its assets and earnings due to violations of law, rules, regulations and unsound practices and is in an unsafe and unsound condition to transact business." Resolution No. 89-1090 (Office of Thrift Supervision's Motion for Summary Judgment ("OTS Memorandum"), Exhibit A).

 On August 9, 1989, Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"). Pub. L. No. 101-73, 101 Stat. 292. FIRREA abolished the Bank Board and FSLIC. RTC succeeded FSLIC as conservator for Gibraltar and OTS succeeded the Bank Board as the regulator of federally-insured savings associations. In addition, FIRREA provides the Director of OTS with the authority to appoint conservators and receivers for savings associations upon the finding of certain enumerated unsafe or unsound banking conditions, such as insolvency or dissipation of assets. See 12 U.S.C. 1464(d)(2)(A) (listing the appointment grounds for a federal savings association), 1464(d)(2)(C) (listing the appointment grounds for a state savings association).

 On October 30, 1989, the Director exercised his appointment authority and replaced the RTC as conservator for Gibraltar with the RTC as receiver for Gibraltar. The Director found one ground for appointing the receiver for Gibraltar. The ground was that Gibraltar was insolvent in that its assets were less than its obligations to its creditors. See 12 U.S.C. § 1464(d)(2)(C)(i). On November 28, 1989, Gibraltar filed this action challenging the appointment of a receiver.

 II. DISCUSSION

 A. Judicial Review

 The first issue presented by this case is the nature of the Court's review. Gibraltar argues that the Court's review of the appointment of a receiver is de novo and that the Court's inquiry is not limited to the administrative record. OTS, on the other hand, argues that the Court's standard of review is arbitrary or capricious and that the Court's inquiry is limited to the administrative record. For the reasons that follow, the Court agrees with OTS that the standard of review is arbitrary or capricious and that the Court's inquiry is limited to the administrative record.

 1. Standard of Review

 Judicial review of the Director's decision to appoint a conservator or receiver is provided for in 12 U.S.C. § 1464(d)(2)(E). Although the provision does not provide any guidance as to the standard of review that the Court should apply, the three circuits that have addressed the question have applied the Administrative Procedure Act's ("APA") arbitrary or capricious standard. See Franklin Savings Association v. Office of Thrift Supervision, 934 F.2d 1127 (10th Cir. 1991); Woods v. Federal Home Loan Bank Board, 826 F.2d 1400 (5th Cir. 1987), cert. denied, 485 U.S. 959 99 L. Ed. 2d 422,, 108 S. Ct. 1221 (1988); Guaranty S & L Ass'n v. Federal Home Loan Bank Board, 794 F.2d 1339 (8th Cir. 1986).

 Despite this contrary precedent, Gibraltar raises two arguments for de novo review. First, Gibraltar argues that when a statute specifically allows an aggrieved party to file an action to review an agency's decision, the standard of review is de novo because the standards set forth in the APA are not applicable. Second, Gibraltar asserts that due process requires de novo review.

 The Court finds neither of these arguments persuasive. The fact that the statute is silent as to the type of review does not indicate that the review should be de novo. In fact, the Supreme Court has indicated that where the statute is silent, courts should not engage in a de novo review. United States v. Carlo Bianchi & Co., 373 U.S. 709, 715, 10 L. Ed. 2d 652, 83 S. Ct. 1409 (1963). When the statute is silent, a reviewing court should look to the APA for the appropriate standanrd. Franklin Savings, 934 F.2d at 1138; Guaranty Savings & Loan, 794 F.2d at 1342. In this case, ...


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