IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 91-3930
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LANDMARK LAND COMPANY, INC., ET AL.,
Plaintiffs-Appellees,
versus
OFFICE OF THRIFT SUPERVISION and TIMOTHY RYAN, Director,
Defendants-Appellants.
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Appeal from the United States District Court
for the Eastern District of Louisiana
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(April 29, 1993)
Before WILLIAMS, HIGGINBOTHAM, and BARKSDALE, Circuit Judges.
JERRE S. WILLIAMS, Circuit Judge:
The Office of Thrift Supervision (OTS) appeals from the
district court's granting of injunctive relief to both Landmark
Land Company, Inc. (Landmark) and some of its directors, the
individual plaintiffs. The OTS had issued a temporary cease-and-
desist order against Landmark and the other plaintiffs. The order
prohibited them from dissipating the assets of the subsidiaries of
a savings association and also froze their personal assets pending
the resolution of the underlying administrative cease-and-desist
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proceeding. The district court's injunction suspended the
temporary order. On appeal, the OTS argues that the district court
erred substantively and procedurally in granting the preliminary
injunction. We find that the district court erred procedurally,
and we vacate and remand the injunction for reconsideration by the
district court.
I. FACTS AND PRIOR PROCEEDINGS
Plaintiff-Appellees Gerald G. Barton, Bernard G. Ille, William
W. Vaughan, III, and Joe W. Walser, Jr. were the directors of
plaintiff-appellee Landmark Land Company, Inc., a Delaware
corporation and holding company. Since the mid-1970s, Landmark has
developed and operated several golf courses and resort communities.
In 1982 Landmark acquired a financially troubled thrift in New
Orleans, Louisiana and renamed it Landmark Savings Bank, S.S.B. (a
savings bank chartered by the State of Louisiana). In 1986
Landmark Savings Bank acquired another thrift, to which it
transferred its assets in 1989. The resulting thrift was named Oak
Tree Savings Bank, S.S.B. (Old Oak Tree).
Old Oak Tree owned Clock Tower Place Investments, Ltd. (Clock
Tower), a first-tier subsidiary. Clock Tower in turn owned
numerous second-tier subsidiaries, including Landmark Land Company
of California, Inc.; Landmark Land Company of Carolina, Inc.;
Landmark Land Company of Oklahoma, Inc.; Landmark Land Company of
Florida, Inc.; and Landmark Land Company of Louisiana, Inc.
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(collectively, the subsidiaries). Barton, Ille, Vaughan, and
Walser served as directors of both Landmark and Old Oak Tree.
Barton, Vaughan, and Walser also served as directors and/or
officers of various ones of the subsidiaries.
In August 1989, Congress passed the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (FIRREA).1 Of
critical importance was the change in the capitalization
requirements by FIRREA so that Landmark could no longer use its
real estate holdings to capitalize Old Oak Tree. Although Landmark
sought to sell the golf courses and resort properties held by its
subsidiaries, it was unsuccessful. Between April 1990 and
September 1991, Landmark entered into two contracts to sell the
subsidiaries' real estate holdings. Both contracts, however, fell
through. The OTS refused to approve the first, and after the OTS
stepped in to renegotiate the second, the buyer withdrew the offer.
Meanwhile, Old Oak Tree was incurring significant losses in
1989, 1990, and 1991. After failing to meet minimum capital
requirements in July 1990, Old Oak Tree submitted a capital plan
that OTS rejected. Then, in January 1991, Old Oak Tree and OTS
executed a Consent Agreement that imposed certain restrictions and
requirements on the management of Old Oak Tree. Old Oak Tree
1
FIRREA abolished both the Federal Home Loan Bank Board and
the Federal Savings and Loan Insurance Corporation, and it created
the Office of Thrift Supervision (OTS) to oversee and regulate
savings associations.
3
agreed among other things to obtain prior written approval from OTS
before entering into “any material transaction.”
After the second sales contract fell through, the boards of
directors of the six subsidiaries met in October 1991 to consider
their options. Barton, Walser, and Vaughan were present at several
of these meetings, but chose to abstain from voting. The boards
voted to file Chapter 11 bankruptcy, and such a filing occurred on
October 11, 1991, in the United States Bankruptcy Court for the
District of South Carolina. Each subsidiary then obtained from the
South Carolina bankruptcy court a temporary restraining order,
which prevented Old Oak Tree and the OTS from exercising
shareholder rights to change management to enable withdrawal of the
bankruptcy petitions.
The OTS responded on October 13, 1991, by invoking its
statutory powers pursuant to 12 U.S.C. § 1818 to commence a cease-
and-desist proceeding. The OTS has the authority to pursue cease-
and-desist proceedings against an institution and any institution-
affiliated parties (such as directors and officers) when it decides
that they are engaging in unsound business practices, violating the
law, or breaching an agreement with the OTS. 12 U.S.C.
§ 1818(b)(1). Such a proceeding was commenced in this case by
filing a Notice of Charges setting out the allegations and
scheduling an administrative hearing. The OTS then appointed the
Resolution Trust Corporation (RTC) as receiver for Old Oak Tree and
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chartered Oak Tree Federal Savings Bank of New Orleans, Louisiana
(New Oak Tree).
The Notice of Charges filed against the plaintiffs alleged
that the individual plaintiffs had breached their fiduciary duties
by acting to file the bankruptcy petitions and by failing to inform
the OTS either of the impending bankruptcy or of their conflict of
interest. The Notice of Charges further asserted that the
plaintiffs had violated the Consent Agreement, and the OTS imposed
civil monetary penalties: one million dollars on each of the
individual directors, and on Landmark $500,000 plus an additional
$500,000 for each day beyond October 13 that the individual
plaintiffs failed to withdraw the bankruptcy petitions.
The OTS undertook to act under its authority to issue broad
temporary cease-and-desist orders when it determines that the
unsound practice or violation is “likely to cause insolvency or
significant dissipation of assets.” 12 U.S.C. § 1818(c)(1). Such
a temporary cease-and-desist order may be entered without a hearing
and may require affirmative action. Parker v. Ryan, 959 F.2d 579,
581-82 (5th Cir. 1992). A temporary order becomes effective upon
service, but the institution receiving the order has ten days
within which it can seek judicial review. 12 U.S.C. § 1818(c)(1)
and (2).
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The OTS issued the Temporary Order To Cease and Desist (the
Temporary C&D), and it drastically limited the plaintiffs'
authority and froze the personal assets both of the plaintiffs and
of their family members. The plaintiffs timely applied to the
district court in New Orleans to set aside, limit, or suspend the
Temporary C&D pursuant to 12 U.S.C. § 1818(c)(2). Although the
district court denied the plaintiffs' initial request for a
temporary restraining order, it scheduled a preliminary injunction
hearing for November 1, 1991. Before the hearing, however, the
South Carolina bankruptcy court issued findings and enjoined the
RTC from exercising any shareholder rights over the subsidiaries
and their management. On November 1, the Louisiana district court
took notice of the bankruptcy court's findings, suspended the
Temporary C&D, and sua sponte transferred the plaintiffs'
application to the South Carolina bankruptcy court.
The RTC appealed the South Carolina bankruptcy court's
injunction, and the OTS appealed the Louisiana district court's
transfer. On November 26, 1991, a panel of this court held that it
was error to transfer the application to South Carolina and denied
the OTS's motion to stay the preliminary injunction pending the
appeal of that order. Landmark Land Co., Inc. v. Office of Thrift
Supervision, 948 F.2d 910 (5th Cir. 1991). The South Carolina
bankruptcy court's injunction was subsequently reversed by the U.S.
Court of Appeals for the Fourth Circuit. Thus, the RTC was
authorized to assert its ownership rights over the subsidiaries.
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In re Landmark Land Co. of Okla, Inc., 973 F.2d 283 (4th Cir.
1992). At the end of 1992, the RTC was continuing to operate the
subsidiaries under the jurisdiction of the bankruptcy court.
Over a year has passed since the OTS filed the Notice of
Charges and commenced the underlying administrative action, and
that action has not yet concluded. The Louisiana district court's
injunction suspending the Temporary C&D, however, remains in effect
and is the subject of this timely appeal by the OTS.
II. DISCUSSION
To obtain a preliminary injunction, the plaintiffs had to show
(1) that there was a substantial likelihood they would succeed on
the merits, (2) that they faced a substantial threat of irreparable
harm without the injunction, (3) that the threatened injury
exceeded any harm that would flow from the injunction, and (4) that
the injunction would not undermine the public interest. United
Offshore Co. v. Southern Deepwater Pipeline Co., 899 F.2d 405, 407-
08 (5th 1990). Although the district court must apply a stringent
standard, our review is limited generally to considering whether
the district court abused its discretion. Doran v. Salem Inn,
Inc., 422 U.S. 922, 931-32, 95 S.Ct. 2561, 2568, 45 L.Ed.2d 648
(1975). We review findings of fact for clear error. FED. R. CIV.
P. 52(a). We review de novo the legal questions decided by the
district court. United Offshore Co., 899 F.2d at 407.
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The parties have argued extensively the merits of the
preliminary injunction. Our review, however, does not reach the
merits because the district court did not reach them. The
plaintiffs had filed their complaint and an application for a
temporary restraining order, which they supplemented with a
memorandum of law for the preliminary injunction hearing. The OTS
had filed its response to the application. At the preliminary
injunction hearing, the district court had before it those
documents and the findings of the bankruptcy court. The district
court, however, did not consider the four inquiries required for a
preliminary injunction. Instead, the district court was concerned
about the concurrent bankruptcy proceeding in South Carolina, and
it decided to transfer the action to South Carolina “in the
interest of judicial economy.” By its injunction, the district
court suspended the operation of the Temporary C&D until the
bankruptcy court in South Carolina could take up the matter.
Although we vacated the transfer as improper, the Temporary C&D
remains suspended pending our decision on this appeal.
The district court did not consider the contentions of the
parties, nor did it take further evidence to determine whether a
preliminary injunction was warranted. We conclude that the
district court abused its discretion by failing to apply the four
criteria for preliminary injunctions when it granted the
suspension. The plaintiffs ask us to affirm the injunction, and
the OTS argues that we should reverse and render. Neither action,
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however, is appropriate. We vacate the injunction and remand the
case to the district court. The district court must determine
whether the plaintiffs can make a proper showing and are entitled
to suspension of the Temporary C&D.
In addition to failing to apply the proper criteria, the
district court did not comply with Federal Rules of Civil Procedure
52(a) and 65(d). Rule 52(a) mandates that the district court issue
findings of fact and conclusions of law when it grants an
injunction. Rule 65(d) requires the district court to set forth in
specific terms its reasons for issuing the injunction. The
district court stated generally its reasons for suspending the
Temporary C&D and took notice of the findings of the bankruptcy
court, but failed to issue specific findings.
The plaintiffs argue that the South Carolina bankruptcy
court's findings justify the suspension of the Temporary C&D and
have preclusive effect in the instant case. They assert that the
OTS is barred from relitigating the findings because they are based
upon issues that (1) are identical to those involved in the prior
litigation, (2) have been actually litigated, and (3) have been “a
critical and necessary part of the judgment in the earlier action.”
Terrell v. DeConna, 877 F.2d 1267, 1270 (5th Cir. 1989).
This argument fails for two reasons. First, issue preclusion
does not apply. The question before the court in South Carolina
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was whether it should enjoin the RTC from exercising shareholder
rights over the subsidiaries and from denying Landmark and its
officers access to books and records. The Temporary C&D was not
before the bankruptcy court and has little to do with the RTC's
rights as receiver. Additionally, of course, the Fourth Circuit
reversed the bankruptcy court's injunction. As the United States
Supreme Court has noted, “[E]ven if the second suit is for a
different cause of action, the right, question, or fact once so
determined must, as between the same parties or their privies, be
taken as conclusively established, so long as the judgment in the
first suit remains unmodified.” Southern Pac. R.R. v. United
States, 168 U.S. 1, 48-49, 18 S.Ct. 18, 27, 42 L.Ed. 355 (1897)
(see 18 WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 4416 (1981)).
Although the first suit was as yet unmodified when the district
court suspended the Temporary C&D, it has since been reversed, and
the original findings clearly can have no preclusive effect.2
The second reason the plaintiffs' contention fails is
exemplified by Seattle-First National Bank v. Manges, 900 F.2d 795,
799-800 (5th Cir. 1990). In that case, the district court had
adopted the magistrate's findings of fact and had issued a
preliminary injunction. Although we held that the district court
2
The OTS also argues that issue preclusion is inapplicable
because there is no privity between the parties. The plaintiffs
counter that decisions rendered against one federal agency have
preclusive effect against another, citing 18 WRIGHT ET AL., FEDERAL
PRACTICE AND PROCEDURE § 4458 (1981). In light of our determination
above, we need not consider this contention.
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did not abuse its discretion in granting the injunction because the
movant had made the proper showing, we nevertheless remanded the
case to the district court so it could issue its own findings.
More is required here since the district court merely took notice
of the bankruptcy court's findings. We also recognize that an
appellate court can review a district court record in the absence
of findings and conclusions as long as (1) the record is
exceptionally clear and (2) remand would serve no useful purpose.
White v. Carlucci, 862 F.2d 1209, 1210-11 n.1 (5th Cir. 1989). In
this case, however, we find that disputes in the record warrant
remand. Under Manges, we must remand the case to the district
court for issuance of its own findings of fact and conclusions of
law.
Finally, an evidentiary hearing is necessary on remand only if
the parties are disputing material facts. Otherwise, a hearing on
the basis of briefing and affidavits is sufficient. Parker v.
Ryan, 959 F.2d 579, 583 (5th Cir. 1992); FSLIC v. Dixon, 835 F.2d
554, 558 (5th Cir. 1987). The record reveals several disputes of
material fact that the district court must necessarily resolve in
deciding whether to issue the injunction. An evidentiary hearing
thus is in order upon remand.
III. CONCLUSION
The district court did not consider whether the plaintiffs
made the requisite showing to warrant suspension of the Temporary
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C&D. The district court also did not issue its own findings of
fact and conclusions of law. We vacate the suspension of the
Temporary C&D and remand to the district court for an evidentiary
hearing on the plaintiffs' application for a preliminary
injunction.
VACATED AND REMANDED.
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