Board of Governors of Federal Reserve System v. DLG Financial Corp. ( 1994 )


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  •                     UNITED STATES COURT OF APPEALS
                             FOR THE FIFTH CIRCUIT
    
    
    
                           Nos. 93-2944 & 94-20013
    
    
    
    BOARD OF GOVERNORS OF THE FEDERAL
    RESERVE SYSTEM,
    
                                                     Plaintiff-Appellee,
    
                                    versus
    
    DLG FINANCIAL CORP. and
    DANIEL S. DE LA GARZA
    
                                                     Defendants-
    Appellants.
    
    
    
                Appeals from the United States District Court
                      For the Southern District of Texas
    
                                      C\W
    
                                 No. 94-10078
    
    DLG FINANCIAL CORPORATION and
    DANIEL S. DE LA GARZA,
    
                                                     Plaintiffs-
    Appellants,
                                    versus
    
    FEDERAL   RESERVE SYSTEM OF THE UNITED
    STATES,   BOARD OF GOVERNORS, FEDERAL
    RESERVE   BANK OF DALLAS and THE FEDERAL
    DEPOSIT   INSURANCE CORPORATION,
    
                                                     Defendants-
    Appellees.
    
    
                 Appeal from the United States District Court
                      for the Northern District of Texas
    
                              (August 15, 1994)
    Before GOLDBERG, KING, and WIENER, Circuit Judges.
    
    WIENER, Circuit Judge:
    
         These consolidated appeals stem from two separate actions,
    
    one filed in the federal district court for the Northern District
    
    of Texas (hereafter the Dallas Court), and the other filed in the
    
    federal district court for the Southern District of Texas
    
    (hereafter the Houston Court).    In the Dallas action, Appellants
    
    DLG Financial Corporation ("DLG") and Daniel S. De La Garza ("De
    
    La Garza") appeal the Dallas Court's decision to dismiss various
    
    state and federal claims they brought against the Board of
    
    Governors of the Federal Reserve System ("Board"), the Federal
    
    Reserve Bank of Dallas ("FRBD"), and the Federal Deposit
    
    Insurance Corporation ("FDIC").   As we conclude that these claims
    
    are precluded by the Federal Deposit Insurance Act ("FDIA"), the
    
    Federal Tort Claims Act ("FTCA"), and the Tucker Act, we affirm
    
    the dismissal of these claims.
    
         In the Houston action, DLG and De La Garza appeal the
    
    Houston Court's issuance of a restraining order and a preliminary
    
    injunction, pursuant to FDIA § 1818(i)(4), that encumbered
    
    certain of their assets.   Finding the restraining order to be
    
    unappealable, we dismiss the appeal of that order.   With respect
    
    to the appeal of the preliminary injunction, we conclude that DLG
    
    and De La Garza were afforded due process and that the Board made
    
    the requisite showing; we therefore affirm the Houston Court's
    
    order granting injunctive relief.
    
    
    
                                      2
                                          I
    
                              FACTS AND PROCEEDINGS
    
         DLG is a company engaged in the business of buying discount
    
    promissory notes and other assets of failed commercial entities and
    
    reselling them at a profit.        De La Garza is the president, CEO, and
    
    sole shareholder of DLG.        On October 30, 1990, DLG entered into a
    
    letter agreement to purchase two promissory notes from NCNB Texas
    
    National Bank, N.A., which was acting on behalf of the FDIC.                      These
    
    notes were executed by International Bancorporation, Inc. ("IBI")
    
    and were secured by a pledge of all outstanding common stock of
    
    International Bank, N.A.        The security agreement provided that if
    
    the notes came into default the noteholder could exercise all of
    
    the voting rights and corporate powers concerning the pledged stock
    
    without having to foreclose on the notes.
    
         Between    the    execution    of       the    letter      agreement       and   the
    
    acquisition of the promissory notes by DLG, the relationship
    
    between the parties grew contentious.                   Ultimately, DLG and De La
    
    Garza were forced to sue the FDIC to compel performance under the
    
    letter agreement.       On March 17, 1992, pursuant to a settlement
    
    agreement, DLG acquired the promissory notes for $1,000,000.                           At
    
    the time of acquisition, the notes were already in default.
    
         Shortly after DLG obtained the notes from the FDIC, another
    
    fiscal agency of the federal government, the FRBDSQthe entity that
    
    supervises    bank    holding   companies          in   Texas    on    behalf    of   the
    
    BoardSQwrote to DLG stating that its purchase of the promissory
    
    notes   and   the    concomitant   acquisition            of    bank   voting    rights
    
    
                                             3
    appeared to violate the Bank Holding Company Act ("BHCA"),1 which,
    
    inter alia, generally prohibits an entity from becoming a bank
    
    holding company without obtaining prior approval from the Board.2
    
    The letter from the FRBD instructed DLG to file immediately either
    
    (1) an application for approval to acquire the notes or (2) a
    
    divestiture plan.3
    
         DLG and De La Garza, however, insist that DLG did not become
    
    a bank holding company by purchasing the notes, and therefore prior
    
    Board approval was not required.     Accordingly, they responded to
    
    the letter from the FRBD by turning to the courts.
    
         A.   The Dallas Action
    
         On October 9, 1992, DLG and De La Garza filed suit in the
    
    Dallas Court against the Board, the FRBD, and the FDIC.    In this
    
    action, DLG and De La Garza sought declaratory and injunctive
    
    relief to (1) establish their rights with respect to the promissory
    
    notes, (2) prevent interference with those rights, and (3) preclude
    
    the Board from asserting jurisdiction over DLG as a bank holding
    
    company under the BHCA.   DLG and De La Garza also sought monetary
    
    
         1
          12 U.S.C. §§ 1841-1850 (1988 & Supp. III 1991).
         2
          Section 1842(a)(1) of the BHCA prohibits an entity from
    becoming a bank holding company without obtaining prior approval
    of the Board. In general, a bank holding company is any company
    that has control over a bank. Id. § 1841(a)(1). One way that a
    company can control a bank is to own, control, or have the power
    to vote 25% or more of any class of voting security of a bank,
    whether directly, indirectly, or acting through one or more
    other persons. Id. § 1841(a)(2)(A).
         3
          DLG and the FRBD later agreed that within 60 days DLG would
    sell the notes, obtain Board approval, or file a new divestiture
    plan.
    
                                     4
    damages and attorney's fees for breach of contract, tortious
    
    interference with contract, tortious interference with prospective
    
    contractual and business relations, fraud, conspiracy to commit
    
    fraud, and violations of the Due Process Clause of the Fifth
    
    Amendment.
    
           On March 30, 1993, the Dallas Court dismissed DLG's and De La
    
    Garza's claims for declaratory and injunctive relief, reasoning
    
    that       such   relief   was   explicitly   precluded   by   12   U.S.C.
    
    § 1818(i)(1).        As for the monetary claims, the court dismissed
    
    (1) DLG's and De La Garza's state-law tort claims against the Board
    
    and the FDIC, holding that such claims must be brought against the
    
    United States pursuant to the Federal Tort Claims Act ("FTCA")4;
    
    (2) a constitutional takings claim against the Board, finding that
    
    the Tucker Act granted the Court of Federal Claims exclusive
    
    jurisdiction over such an action5; (3) a motion to dismiss a
    
    takings claim against the FDIC6; and (4) a breach of contract claim
    
    against the FDIC, but granted an opportunity to replead.            DLG and
    
    De La Garza amended their complaint, but, late in 1993, voluntarily
    
    dismissed all remaining claims and filed this appeal.
    
           In May 1993, IBI redeemed the promissory notes for $2,000,000.
    
    
           4
            28 U.S.C. §§ 2671-2680 (1988 & Supp. III 1991).
           5
          28 U.S.C.A. § 1491(a)(1) (West 1994). The district court
    denied a motion to dismiss without prejudice Appellants' state-
    law tort and constitutional claims against the FRBD, declining to
    decide whether the FTCA or the Tucker Act applied to that entity.
    Subsequently, appellants voluntarily dismissed these claims.
           6
          Appellants voluntarily dismissed takings claims against the
    other defendants.
    
                                          5
    De La Garza instructed IBI to wire the payment to a recently formed
    
    entity headed by his wife, Southwest Underwood Company, which had
    
    no previous connection with the promissory note transaction.
    
         On September 22, 1993, a state grand jury sitting in Travis
    
    County, Texas returned an indictment charging De La Garza and
    
    others with misapplication of approximately $9,000,000 in insurance
    
    company assets.7    This indictment and De La Garza's decision to
    
    have the proceeds of the sale of the notes wired to Southwest
    
    Underwood Company precipitated, in part, the Board's decision to
    
    commence litigation in the Houston Court.
    
         B.     The Houston Action
    
         In October 1993, pursuant to its authority under the Federal
    
    Deposit     Insurance   Act   ("FDIA"),8   the   Board   commenced   an
    
    administrative proceeding against DLG and De La Garza.         In this
    
    proceeding, the Board made the same allegation asserted earlier by
    
    the FRBD))namely, that the acquisition of the promissory notes made
    
    DLG a bank holding company, and therefore the failure to obtain
    
    Board approval prior to the purchase of the notes violated the
    
    BHCA.     Based on this charge, the Board assessed civil penalties
    
    totaling $1,000,000))$500,000 each against DLG and De La Garza9 but
    
         7
          Of which amount, roughly $900,000 was used for the purchase
    of the promissory notes that gave rise to this litigation.
         8
          Under the Federal Deposit Insurance Act ("FDIA"), 12
    U.S.C.A. §§ 1811-1834b (West 1989 & Supp. 1994), the Board has
    the exclusive authority to commence administrative proceedings
    for civil penalties and other relief for violations of the BHCA.
    Id. §§ 1818(b)(3), 1818(i).
         9
          See BHCA, 12 U.S.C. § 1847(b)(1) (providing for the
    imposition of civil fines of up to $25,000 per day against any
    
                                       6
    provided that the fines were payable only after an opportunity for
    
    an   adversary   administrative      enforcement      proceeding    and   the
    
    exhaustion of appeals therefrom.
    
         On November 1, 1993, the Board filed a motion in the Houston
    
    Court, seeking a restraining order to freeze De La Garza's and
    
    DLG's assets to prevent their dissipation.10           As noted, the Board
    
    relied, in part, on De La Garza's alleged "diversion" of the
    
    proceeds from    the   sale   of   the   promissory    notes   to   Southwest
    
    Underwood Company, and on his recent indictment for misapplying
    
    insurance company assets, as justification for seeking such an
    
    order.
    
         Based on the evidence presented by the Board, which included
    
    a sworn declaration by an agency official, the court found that the
    
    Board had made a prima facie showing that DLG and De La Garza had
    
    violated the BHCA and that civil penalties were justified.11              The
    
    
    company or person who participates in the violation of the BHCA).
         10
          The FDIA empowers the Board to obtain such a restraining
    order to assist it in its administrative actions. Specifically,
    § 1818(i)(4)(A) provides that a district court may, "in the aid
    of . . . any administrative . . . action for . . . civil money
    penalties . . . issue a restraining order that))(i) prohibits any
    person subject to the proceeding from withdrawing, transferring,
    removing, dissipating, or disposing of any funds, assets or other
    property."
         11
          DLG purchased the promissory notes before the effective
    date of the 1993 amendments to the BHCA. These amendments
    altered the burden of proof that the Board must meet prior to
    attaching assets. Compare 12 U.S.C. § 1818(i)(4)(B) (Supp. III
    1991) ("A permanent or temporary injunction or restraining order
    shall be granted without bond upon a prima facie showing that
    money damages, restitution, or civil money penalties, as sought
    by such agency, is appropriate.") with 12 U.S.C.A.
    § 1818(i)(4)(B) (West Supp. 1994) ("Rule 65 of the Federal Rules
    of Civil Procedure shall apply [to an application for a
    
                                         7
    court immediately issued an "Order to Show Cause and Temporary
    
    Restraining Order," commanding DLG and De La Garza to appear in
    
    court on November 3, 1993, and show cause why they should not be
    
    enjoined from "withdrawing, transferring, removing, dissipating, or
    
    disposing of" their assets ("November 1 Order").              Pending further
    
    order of the court, the November 1 Order also prohibited DLG and De
    
    La     Garza,   or   any   of   their       employees,     from    withdrawing,
    
    transferring, removing, dissipating, or disposing of any of their
    
    assets.    DLG and De La Garza appeal this order.
    
           Two days later, on November 3, 1993, a hearing was conducted
    
    by the Houston Court during which it received evidence and heard
    
    arguments from both sides.       From the bench Chief Judge Black then
    
    orally issued a preliminary injunction ("November 3 Injunction")
    
    that substantially modified and limited the November 1 Order,
    
    imposing a lien of $1,000,000 on but three among a number of
    
    properties owned by DLG.         A slightly modified version of this
    
    preliminary injunction was issued in written form on December 23,
    
    1993    ("December    23   Injunction"),       replacing     the   November   3
    
    Injunction entirely.       De La Garza and DLG appeal from the December
    
    23 Injunction.
    
           On March 17, 1994, the district court again modified its
    
    injunction, but unlike the December 23 Injunction, this March 17
    
    modification was just thatSQa modificationSQwhich did not supplant
    
    the prior injunction.      DLG and De La Garza have appealed the March
    
    
    restraining order] without regard to the requirement of such rule
    that the applicant show that the injury, loss, or damage is
    irreparable and immediate.").
    
                                            8
    17 modification, but the appeal of this modification was not
    
    consolidated with the instant appeals and thus is not before us.
    
                                           II
    
                                         ANALYSIS
    
    A.    The Dallas Action
    
          We address first whether the Dallas Court properly dismissed
    
    claims by DLG and De La Garza for declaratory and injunctive relief
    
    and monetary damages.        We conclude that it did.
    
          1.     Declaratory and Injunctive Relief
    
          DLG and De La Garza filed the Dallas action against the Board,
    
    the FRBD, and the FDIC, seeking various declaratory and injunctive
    
    relief.       The Dallas Court dismissed these claims, reasoning that
    
    such relief was precluded by § 1818(i)(1) of the FDIA.                 We agree.
    
          DLG and De La Garza argue that the district court's decision
    
    is flawed because, when they filed the Dallas action, there was no
    
    ongoing      administrative    proceeding.         We    find   this    argument
    
    unavailing.
    
          In essence DLG and De La Garza asked the district court to
    
    enjoin the board from continuing its investigation into or bringing
    
    an   enforcement       proceeding    against    them.    Section    1818(i)(1),
    
    however, provides that "no court shall have jurisdiction to affect
    
    by injunction or otherwise the issuance or enforcement of any
    
    notice, or order under [this section], or to review, modify,
    
    suspend, terminate, or set aside any such notice or order."12
    
    Accordingly,       §    1818(i)(1)    divested     the   district      court   of
    
          12
               12 U.S.C. § 1818(i)(1).      (emphasis added).
    
                                            9
    jurisdiction         to   enjoin    the    commencement       of   the   Board's
    
    administrative enforcement. The fact that no administrative action
    
    was pending when DLG and De La Garza filed the Dallas action is
    
    irrelevant to this determination.              As this court stated in Groos
    
    National Bank v. Comptroller of Currency,13 "[s]ection 1818 as a
    
    whole provides a detailed framework for regulatory enforcement and
    
    for orderly review of the various stages of enforcement; and
    
    §   1818(i)     in   particular    evinces     a   clear   intention   that    this
    
    regulatory process is not to be disturbed by untimely judicial
    
    intervention, at least where there is no `clear departure from
    
    statutory authority.'"14
    
          2.     Claims for Monetary Damages
    
          The Dallas Court dismissed state-law tort claims against the
    
    Board and the FDIC.        This judgment was proper, as such claims must
    
    be brought against the United States pursuant to the FTCA.                    DLG's
    
    and De La Garza's contention that their state-law tort claims
    
    against the FDIC should not have been dismissed because § 1819(a)
    
    of the FDIA authorizes the FDIC to "sue and be sued"15 is feckless.
    
    We have noted that, notwithstanding the "sue and be sued" clause of
    
          13
          
    573 F.2d 889
    , 895 (5th Cir. 1978) (quoting Manges v. Camp,
    
    474 F.2d 97
    , 99 (5th Cir. 1973)).
          14
          Latching onto the last phrase in the quotation above,
    Appellants argue that we should recognize an exception to the
    explicit command of § 1818(i)(1) and permit an action to enjoin
    the Board from acting beyond its statutory authority. In Board
    of Governors of Federal Reserve System v. MCorp Financial, Inc.,
    
    502 U.S. 32
    , (1991), however, the Supreme Court rejected this
    very argument and held that a "beyond the Board's statutory
    authority" exception to § 1818(i)(1) is not available.
          15
               See 12 U.S.C. § 1819(a) (Supp. III 1991).
    
                                              10
    § 1819(a), the FTCA provides the exclusive avenue for claims
    
    cognizable under that Act.16
    
         Also correct was the court's dismissal of the takings claim
    
    against the Board.        The Tucker Act17 and the Little Tucker Act18
    
    operate     to   vest   the   Court   of    Federal   Claims   with   exclusive
    
    jurisdiction for all constitutional claims against the federal
    
    government for money damages exceeding $10,000.19              Because DLG and
    
    De La Garza sought $25,000,000 for the alleged violations of their
    
    rights, the district court properly determined that this takings
    
    claim must be brought before the Court of Federal Claims.                 Thus
    
    concluding that the Dallas Court properly dismissed the foregoing
    
    claims, we next address related proceedings conducted further
    
    south, in the Houston federal courthouse.
    
    B.   The Houston Action
    
         We shall consider first whether the Houston Court's November
    
    1 Order is appealable.         Next, we shall turn to DLG's and De La
    
    Garza's argument that § 1811(i)(4) violated due process.               Finally,
    
    
         16
              See Gregory v. Mitchell, 
    634 F.2d 199
    , 204 (5th Cir.
    1981).
         17
              28 U.S.C.A. § 1491(a)(1) (West 1994).
         18
          28 U.S.C. § 1346(a)(2) (1988) (granting district courts
    concurrent jurisdiction for takings claims not exceeding
    $10,000).
         19
          See Preseault v. I.C.C., 
    494 U.S. 1
     (1990); Graham v.
    Henegar, 
    640 F.2d 732
    , 734 (5th Cir. Unit A 1981); see also Bell
    Atl. Tel. Co. v. FCC, Nos. 92-1619, 92-1620, 93-1028, and 93-
    1053, 
    1994 WL 247134
    , at *6 n.1 (D.C. Cir. June 10, 1994) ("The
    Tucker Act, 28 U.S.C. § 1491(a)(1), vests exclusive jurisdiction
    over takings claims that exceed $10,000 in controversy . . . in
    the United States [Court of Federal Claims].")
    
                                           11
    we shall consider their claim that they were not required to obtain
    
    Board approval prior to acquiring the promissory notes.
    
           1.   The November 1 Order
    
           On November 1, the district court issued an order commanding
    
    DLG and De La Garza to appear two days later and show cause why
    
    they    should   not   be   enjoined   from   "withdrawing,   transferring,
    
    removing, dissipating, or disposing of" their assets.             The Board
    
    urges that this order is not appealable, and we agree.            We arrive
    
    at our conclusion based on two distinct but related rationales.
    
           First, we find the November 1 Order to be, in substance, an
    
    unappealable temporary restraining order ("TRO").             In general, a
    
    TRO is not appealable.20         This is so because, as Judge Tuttle
    
    observed, TROs are "usually effective for only very brief periods
    
    of time, far less than the time required for an appeal . . . and
    
    are then generally supplanted by appealable temporary or permanent
    
    injunctions."21    That is precisely what happened here.          Less than
    
    two days after its issuance, the November 1 Order evaporated when,
    
    upon completion of the show cause hearing, Chief Judge Black orally
    
    entered a preliminary injunction that supplanted the TRO.              This
    
    injunction, as Judge Tuttle might have forecast, subsequently was
    
    appealed.
    
           We find unpersuasive the arguments by DLG and De La Garza to
    
           20
           In re Lieb, 
    915 F.2d 180
    , 183 (5th Cir. 1990) ("This court
    has long held that the denial of an application for a [TRO] is
    not appealable."); see 11 CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL
    PRACTICE AND PROCEDURE § 2962, at 616 (1973).
           21
          Connell v. Dulien Steel Prods., Inc., 
    240 F.2d 414
    , 418
    (5th Cir. 1957), cert. denied, 
    356 U.S. 968
     (1958).
    
                                           12
    the contrary.      They contend that because the November 1 Order had
    
    no specific expiration date, it was in substance a preliminary
    
    injunction and thus was appealable.        Although a TRO with a lengthy
    
    duration may be appealable, the two-day term of the November 1
    
    Order clearly was insufficient for any such transmogrification.
    
         Second, mootness interdicts the appeal of the November 1
    
    Order; it became moot when it was superseded by the November 3
    
    Injunction.     Thus, since November 3, 1993, DLG and De La Garza have
    
    been free of the restraints imposed on them by the November 1
    
    Order.     Moreover, because the preliminary injunction was appealed,
    
    we need not consider the November 1 Order "to protect the rights of
    
    the parties."22     The rights of the parties were guarded adequately
    
    through appeal of the subsequently issued injunctions.
    
         2.      Section 1818(i)(4) Comports with Due Process
    
         DLG and De La Garza contend that the Houston Court's November
    
    1 Order and the subsequent injunctions granted by that court were
    
    improper, as the provision authorizing the court to encumber assets
    
    violated the Due Process Clause of the Fifth Amendment.                In
    
    particular,      they   argue   that     the   version   of   12   U.S.C.
    
    § 1818(i)(4)(A) in effect before December 1993 was unconstitutional
    
    in that it required a court to grant injunctive relief without a
    
    predeprivation hearing.      But, as the statute merely permitted the
    
    court to act without a hearing but clearly did not require it to do
    
    so, this argument is specious.         Moreover, as explained below, a
    
    predeprivation hearing was not constitutionally required in this
    
         22
              WRIGHT & MILLER, supra, note 20, § 2962, at 618.
    
                                        13
    case.
    
                  a.      Section 1818 Permitted, But Did Not Require,
                          Injunctive Relief Without A Predeprivation Hearing
    
          Section 1818(i)(4)(A) provides that a district court may, "in
    
    the aid of . . . any administrative . . . action for . . . civil
    
    money penalties . . . issue a restraining order that))(i) prohibits
    
    any     person        subject     to   the        proceeding     from       withdrawing,
    
    transferring, removing, dissipating, or disposing of any funds,
    
    assets or other property."             Prior to December 1993, the section
    
    also stated that such "[a] permanent or temporary injunction or
    
    restraining order shall be granted . . . [only] upon a prima facie
    
    showing that . . . civil money penalties . . . [are] appropriate."23
    
    Although      in    general      statutory    schemes    use        "may"   to   identify
    
    permissive         acts    and   "shall"     to    identify    mandatory         acts,   in
    
    circumstances such as this where "shall" is used with reference to
    
    a court's authority to render an equitable decision, the use of
    
    "shall" does not eliminate all discretion absent "an unequivocal
    
    statement        of       [congressional]         purpose"     to     do    so.24        As
    
    § 1818(i)(4)(B) lacks such a clear legislative command,25 "shall"
    
    as used in this paragraph thus permitted))but did not require))an
    
    injunction to be issued without a hearing.                   Moreover, based on the
    
    
          23
               12 U.S.C. § 1818(i)(4)(B)(i) (Supp. III 1991) (amended
    1993).
          24
          Hecht Co. v. Bowles, 
    321 U.S. 321
    , 329 (1944); Director,
    OTS v. Lopez, 
    960 F.2d 958
    , 961 n.8 (1992).
          25
          Lopez, 960 F.2d at 961 n.8 (finding that § 1818(i)(4)(B)
    did not strip district court of discretion to order prejudgment
    attachment of assets upon a prima facie showing).
    
                                                 14
    facts of this case, a predeprivation hearing was not required.
    
                 b.    A Predeprivation Hearing Was
                       Not Constitutionally Required
    
         It is undisputed that § 1818(i)(4) allowed a court to freeze
    
    assets, thereby depriving a property interest and triggering the
    
    Due Process Clause of the Fifth Amendment.26           The parties differ,
    
    though, on what process was due.
    
         In general, individuals must receive notice and an opportunity
    
    to be heard before the government deprives them of a property
    
    interest.27       But there are exceptions to the general rule, and the
    
    Board     maintains    that   this   case   provides   an   example   of   an
    
    "extraordinary situation[] where some valid governmental interest
    
    is at stake that justifies postponing the hearing until after the
    
    [deprivation]."28       In light of Supreme Court authority identifying
    
    when such situations exist, we agree.
    
                 i.     Mallen factors
    
         In FDIC v. Mallen,29 the Supreme Court identified three factors
    
    that typically are present in cases in which a postdeprivation
    
    hearing is sufficient to satisfy due process:           (1) the action is
    
    necessary to further an important governmental interest; (2) there
    
    is a need for prompt action; and (3) there is a substantial
    
    
    
         26
              U.S. CONST. amend. V.
         27
          See, e.g., United States v. James Daniel Good Real
    Property, 
    114 S. Ct. 492
    , 498 (1993).
         28
              Id. at 501 (quotations omitted).
         29
              
    486 U.S. 230
     (1988).
    
                                          15
    assurance that the deprivation is not baseless or unwarranted.30
    
    Here, all three factors were present.
    
         First, the government has an important interest in maintaining
    
    public confidence in the integrity of financial institutions.    In
    
    fact, in Spiegel v. Ryan,31 the Ninth Circuit held that such an
    
    interest was sufficiently important to justify ordering a bank
    
    official to pay restitution pending an administrative hearing to
    
    determine whether a permanent cease and desist order should issue.
    
         Moreover, in Mallen itself, the Court found the government's
    
    interest in maintaining public confidence in banking institutions
    
    to be of sufficient importance to forego a predeprivation hearing.
    
    In that case, the Court upheld the constitutionality of § 1818(g)
    
    of the FDIA, which permits the FDIC to suspend from office, without
    
    a predeprivation hearing, an indicted bank official if his or her
    
    continued service is deemed by the FDIC to pose a threat to the
    
    interests of the bank's depositors or to public confidence in the
    
    bank.     The Court allowed such deprivation to stand despite the
    
    absence of a prior hearing, given the importance of taking prompt
    
    action to protect depositors and "to maintain public confidence in
    
    our banking institutions."32   We conclude that the Board's interest
    
         30
          Id. at 240; see Fuentes v. Shevin, 
    407 U.S. 67
    , 91 (1972);
    see also North Am. Cold Storage Co. v. Chicago, 
    211 U.S. 306
    (1908) (permitting officials to order destruction of putrid
    poultry before giving notice and an opportunity to be heard
    because of public health exigency).
         31
          
    946 F.2d 1435
    , 1440 (9th Cir. 1991), cert. denied, 112 S.
    Ct. 1584 (1992).
         32
          Mallen, 486 U.S. at 241. In Mallen, Justice Stevens noted
    that such an interest "is certainly as significant as the State's
    
                                     16
    in freezing the assets of DLG and De La Garza was at least as
    
    strong as it was in Spiegel and Mallen.33
    
           Second, prompt action was necessary.          In general, prompt ex
    
    parte action is necessary to prevent persons identified in Board
    
    administrative actions from dissipating or concealing assets.                In
    
    the instant case, De La GarzaSQwho had been indicted by a grand
    
    jury    in   Texas   for    misapplying     the   assets   of   an   insurance
    
    companySQdirected the proceeds from the sale of the promissory
    
    notes to the account of a recently formed corporation that had no
    
    known prior involvement with the note transaction and of which De
    
    La Garza's wife was the president. Those facts provide substantial
    
    evidence supporting the need for prompt action.
    
           Third, the deprivation was neither baseless nor unwarranted.
    
    Section 1818(i)(4) was drawn to further its stated interest.                 To
    
    obtain an injunction, the Board was required to make a prima facie
    
    showing that civil money penalties were appropriate.                 The Board
    
    here made out such a case, submitting to the court the verified
    
    statement    of   Stephen    Meyer,   who   satisfactorily      explained   the
    
    Board's finding that civil money penalties were justified.                  The
    
    Houston Court evaluated this declaration and found that the Board
    
    
    interest in preserving the integrity of the sport of horse
    racing, an interest that we deemed sufficiently important in
    Barry v. Barchi, [
    443 U.S. 55
    , 64-65 (1979),] to justify a brief
    period of suspension prior to affording the suspended trainer a
    hearing." Id.
           33
          Freezing the assets of DLG and De La Garza directly
    furthers the government's interest in collecting fines that it
    may, in the future, be entitled to collect and indirectly
    furthers the government's interest in maintaining the integrity
    of financial institutions.
    
                                          17
    had established that civil penalties were warranted.                    Moreover,
    
    both the November 3 and December 23 Injunctions were narrowly
    
    tailored to encumber assets having no more aggregate value than was
    
    necessary      to   satisfy    the   civil   penalties       in   the   event   of
    
    nonpayment.         In sum, the three factors that the Mallen Court
    
    identified as being required for a postdeprivation hearing to be
    
    sufficient to satisfy due process were present here.
    
                  ii.   Mathews Balancing
    
          More recent Supreme Court cases support the conclusion that a
    
    predeprivation hearing was not required here.            In United States v.
    
    James Daniel Good Real Property,34 the Court employed the Mathews
    
    v. Eldridge35 balancing test to determine whether the seizure of
    
    real property without notice and without a hearing comported with
    
    due   process.36       The    factors   weighed   in   the    familiar    Mathews
    
    balancing test are "the private interest affected by the official
    
    action; the risk of an erroneous deprivation of that interest
    
    through the procedures used, as well as the probable value of
    
    additional safeguards; and the government's interest, including the
    
    administrative burden that additional procedural requirements would
    
    
    
    
          34
               
    114 S. Ct. 492
     (1993).
          35
               
    424 U.S. 319
     (1976).
          36
          See James Daniel Good Real Property, 114 S. Ct. at 501;
    see also Connecticut v. Doehr, 
    501 U.S. 1
     (1991) (relying upon
    the Mathews balancing test to determine the constitutionality of
    a Connecticut statute that authorized the prejudgment attachment
    of real estate without prior notice or hearing).
    
                                            18
    impose."37        Applying   the    Mathews      test   to   the   instant   case
    
    demonstrates that due process did not require a predeprivation
    
    hearing.
    
         On one side of the scale, the freeze of Appellants' assets
    
    unquestionably affected an important property interest.38 Also, the
    
    risk of an erroneous deprivation was substantial.              The danger of an
    
    erroneous deprivation in this case))in which the availability of
    
    prejudgment attachment is conditioned on the establishment of a
    
    prima facie case))differed little from the risk of an erroneous
    
    deprivation present in Doehr.39
    
         On the other side of the scale, the government's interest and
    
    the presence of exigent circumstances weigh heavily against the
    
    need of a predeprivation hearing.              In Doehr, the Court noted that
    
    "there was no allegation that Doehr was about to transfer or
    
    encumber his real estate or take any other action during the
    
    pendency     of   the   action     that    would    render   his   real   estate
    
    unavailable to satisfy a judgment."40              Significantly, though, the
    
    Court explained that "a properly supported claim [that a person was
    
    about to transfer or encumber his assets] would be an exigent
    
    
         37
          James Daniel Good Real Property, 114 S. Ct. at 501 (citing
    Mathews, 424 U.S. at 335).
         38
          See Doehr, 501 U.S. at 11 (stating that "the property
    interests that attachment affects are significant").
         39
          See id. at 12 (finding the risk of an erroneous
    deprivation to be "substantial" where prejudgment attachment
    could be achieved by showing that there was probable cause to
    sustain the validity of the plaintiff's claim).
         40
              Id. at 16.
    
                                              19
    circumstance permitting postponing any notice or hearing until
    
    after the attachment is effected."41                 In this case, the Board
    
    adequately supported its claim that De La Garza was disposed to
    
    dissipating his assets by showing that (1) he had been indicted for
    
    misapplying assets of an insurance company, and (2) he had ordered
    
    that    the     proceeds    from   the   sale   of   the   promissory    notes    be
    
    delivered to a company controlled by his wife that had no previous
    
    involvement in the note transaction.                 Thus, under the Mathews
    
    balancing test, a postdeprivation hearing was sufficient to satisfy
    
    due process in this case.
    
                   c.      A Postdeprivation Hearing Was Held Promptly
    
           Even     when    a   predeprivation      hearing    is   not   required,   a
    
    "sufficiently prompt" postdeprivation hearing still must be held.42
    
    Here, the Houston Court met this requirement.                    Within two days
    
    after the issuance of its restraining order, the court conducted a
    
    postdeprivation hearing in which the broad assets freeze was lifted
    
    and replaced with a narrowly tailored freeze of barely sufficient
    
    collateral real estate.
    
           During this November 3 postdeprivation hearing, DLG and De La
    
    Garza were given an opportunity to present evidence to an Article
    
    III judge.          After receiving such evidence, the district court
    
    orally imposed a preliminary injunction, encumbering only so much
    
    of the real property of DLG and De La Garza as was necessary to
    
    
           41
          Id. (citing Fuentes v. Shevin, 
    407 U.S. 67
    , 90-92) (1972);
    Sniadach v. Family Fin. Corp., 
    395 U.S. 337
    , 339 (1969)).
           42
                See FDIC v. Mallen, 
    486 U.S. 230
    , 241 (1988).
    
                                              20
    cover the amount of the civil fines that the Board was seeking to
    
    collect.   The scope of this injunction was further refined when it
    
    was issued in writing on December 23, 1993.                  In our view, the
    
    district   court's      prompt   action     and   narrow    tailoring     of    its
    
    orders))which    were    based   on   a     thorough   consideration      of    the
    
    evidence presented))eviscerate the arguments asserted by DLG and
    
    De La Garza in support of their due process claim.
    
         3.    The Board's Prima Facie Case
    
         Finally, DLG and De La Garza insist that the Board did not
    
    present sufficient evidence to establish a prima facie case, as
    
    required to     justify    the   November     1   Order    and   the   subsequent
    
    preliminary injunctions.         We find, however, that the facts are
    
    otherwise.
    
         DLG and De La Garza first argue that DLG was not a bank
    
    holding company because DLG neither owned nor had the ability to
    
    control or vote the stock of the International Bank, N.A.                      This
    
    assertion, however, is refuted by the express terms of the security
    
    agreement containing the pledge of the bank stock as collateral for
    
    the promissory notes.       The agreement provided that, if the notes
    
    came into default, the secured noteholder could exercise all voting
    
    rights of the pledged stock.          As DLG obtained the notes when they
    
    were already in a condition of default, DLG immediately acquired
    
    the power to vote all of the stock in the International Bank, N.A.,
    
    ipso facto becoming a bank holding company pursuant to the BHCA.43
    
         43
          A company becomes a bank holding company if, inter alia,
    it has the power to vote 25% or more of any class of voting
    security of a bank. 12 U.S.C. § 1841(a)(2)(A).
    
                                           21
         Nevertheless, DLG and De La Garza contend that, even if DLG
    
    were a bank holding company, it was not required to obtain Board
    
    approval prior to the acquisition because DLG previously contracted
    
    for control of the bank in good faith, an exception to the notice
    
    requirement.   This argument also lacks merit.
    
         At the outset, we note the explicit admonishment from Congress
    
    that "[t]he Board should interpret . . . exemptions [from the BHCA]
    
    as narrowly as possible in order that all bank holding companies
    
    which should be covered under the Act in order to protect the
    
    public interest will, in fact, be covered."44 Section 1841(a)(5)(D)
    
    exempts prior Board approval if a company becomes a bank holding
    
    company "by virtue of [its] ownership or control of shares acquired
    
    in securing or collecting a debt previously contracted in good
    
    faith."45   But here, when DLG and De La Garza purchased the
    
    promissory notes they were already in default.        So DLG and De La
    
    Garza obtained immediate power to vote the shares of a bank; thus
    
    the debt they acquired was not one that they had "previously
    
    contracted in good faith."
    
         Our    reading   of   §   1841(a)(5)(D)     is   consistent    with
    
    interpretations by the FDIC and the Office of the Comptroller of
    
    the Currency ("OCC") of an analogous provision. Section 1817(j) of
    
    
    
    
         44
          BANK HOLDING COMPANY ACT AMENDMENTS OF 1970, H.R. CONF. REP. NO.
    1747, 91st Cong., 2d Sess. 23 (1970), reprinted in 1970
    U.S.C.C.A.N. 5561, 5574.
         45
          Id. § 1841(a)(5)(D) (emphasis added); 12 C.F.R. §
    225.12(b).
    
                                       22
    the Change in Bank Control Act of 1978 ("CBCA"),46 provides that no
    
    person     may   acquire   control   of    any   insured   bank   unless   the
    
    appropriate federal banking agency has been given prior written
    
    notice of the proposed transaction.47 Prior notice is not required,
    
    however, if the shares are acquired "in satisfaction of a debt
    
    previously contracted in good faith."48
    
         Both the FDIC and the OCC have expressly stated that this
    
    exemption to the notice requirement is not applicable where a loan
    
    collateralized by a controlling interest of the stock of an insured
    
    bank is purchased and the loan already is in default.49            In such an
    
    instance, the FDIC recognized that "the acquisition of the loan and
    
    the acquisition of the shares is virtually inseparable due to the
    
    default status of the loan at the time of its purchase."50             Thus,
    
    "[i]n order for the `good faith' element of the [debt previously
    
    contracted in good faith] exemption to be satisfied, a lender must
    
    either make or acquire a loan secured by bank stock in advance of
    
    any known default."51      As we find neither arbitrary nor capricious
    
         46
          Pub. L. No. 95-630, 92 Stat. 3683 (codified as amended in
    scattered sections of 12 U.S.C.).
         47
          Id. § 1817(j). As with the BHCA, "control" of an insured
    depository institution means, inter alia the power, directly or
    indirectly, to vote 25% or more of any class of voting
    securities.
         48
              See 12 C.F.R. § 5.50(f)(3).
         49
           See FDIC Interp. Ltr. Rul. 84-13 (Aug. 3, 1984); OCC
    Inter. Ltr. No. 451, Fed. Banking L. Rep. (CCH) ¶ 85,675 (Aug. 8,
    1988).
         50
              FDIC Interp. Ltr. Rul. 84-13, at 2.
         51
              OCC Inter. Ltr. No. 451.
    
                                          23
    this        consistent   interpretation,    and   we   see   no   meaningful
    
    distinction between the good faith exemptions of the CBCA and the
    
    BHCA, we conclude that the good faith exemption was inapplicable
    
    here, making prior Board approval a requirement.             And, as DLG and
    
    De La Garza failed to obtain the requisite approval, the Board did
    
    establish a prima facie case that the parties were liable for civil
    
    money penalties under the BHCA.52
    
                                        III
    
                                     CONCLUSION
    
           For the foregoing reasons, we conclude that the Dallas Court
    
    properly dismissed claims by DLG and De La Garza for declaratory
    
    and injunctive relief and monetary damages.            We therefore affirm
    
    the judgment of that district court.
    
           We also conclude that the November 1 Order issued by the
    
    Houston Court was not appealable.          We therefore dismiss the appeal
    
    of that Order.
    
           And finally we conclude that the then-current version of
    
    § 1811(i)(4) of the BHCA did not violate due process, and that the
    
    
           52
          Nevertheless, we are troubled by the actions taken by
    closely related government entities that resulted in these
    lawsuits. Here, the FDIC sold the controlling vote in a bank (by
    virtue of selling an already delinquent promissory note that was
    secured by a pledge of bank stock already susceptible of being
    voted by the pledgee), immediately after which the FRBD
    interceded, alleging that the purchaser was a "bad guy" for
    violating the BHCA requirement for prior approval
    and))coincidentally, or perhaps not so coincidentally))claiming a
    fine exactly equal to the profit made by the purchaser when he
    divested himself of the note (and bank control), as demanded by
    the FRBD. This kind of "Mutt and Jeff" activity by apparently
    over-zealous regulators hardly makes one proud of his government,
    even if such activity is technically lawful.
    
                                         24
    Houston Court was correct in holding that the Board established a
    
    prima facie case that civil money penalties against De La Garza and
    
    DLG were appropriate.   Accordingly, all rulings in that case are,
    
    in all respects, affirmed.
    
    94-10078 is AFFIRMED; 93-2944 is DISMISSED; 94-20013 is AFFIRMED.
    
    
    
    
                                    25