Opinions of the United
1995 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


1-10-1995

Reschini v First Federal
Precedential or Non-Precedential:

Docket 94-3086




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                 UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT

                        _______________

                          NO. 94-3086
                        _______________

                       ROGER J. RESCHINI
                               Appellant

                               v.

                 FIRST FEDERAL SAVINGS AND LOAN
                    ASSOCIATION OF INDIANA;
                                   CHARLES L. FRANCE
                                   _______________


        On Appeal from the United States District Court
           for the Western District of Pennsylvania
                     D.C. No. 94-cv-00122
                        _______________

                      Argued July 11, 1994
                         _______________

      Before: SLOVITER, Chief Judge, ROTH, Circuit Judge,
                  and POLLAK, District Judge*

                    (Filed January 10, 1995)

                        THOMAS E. SWEENEY, JR. (Argued)
                        Sweeney & Associates
                        7300 Penn Avenue
                        Pittsburgh, PA 15208

                                Attorney for Appellant

                        WALTER A. BUNT, JR. (Argued)
                        Kirkpatrick & Lockhart
                        1500 Oliver Building
                        Pittsburgh, PA 15222

                                Attorney for Appellees

*
 . Honorable Louis H. Pollak, United States District Judge for
the Eastern District of Pennsylvania, sitting by designation.
                          ______________

                       OPINION OF THE COURT
                          _______________

POLLAK, District Judge.


          This appeal addresses the dismissal of a suit brought

by appellant Roger J. Reschini against appellees First Federal

Savings and Loan Association of Indiana (the "Association") and

Charles L. France, the chief executive officer of the

Association.   The complaint alleged that the Association and its

chief executive officer had disseminated materially misleading

proxy materials in violation of regulations adopted by the

federal Office of Thrift Supervision (OTS) in carrying out its

supervision of federal savings associations.   The allegedly

deficient proxy materials sought approval by Association members

of the proposed conversion of the Association from a federal

(i.e., federally-chartered) mutual savings and loan association

to a Pennsylvania-chartered mutual savings bank.

          The district court held that §§ 5(i)(2)(B) and 10(j) of

the Home Owners' Loan Act (HOLA), 12 U.S.C. §§ 1464(i)(2)(B) and

1467a(j), giving courts of appeals original and exclusive

jurisdiction over decisions of the Director of the OTS approving

or disapproving conversions of federal savings associations,

precluded exercise by the district court of subject matter

jurisdiction over Reschini's claim.   Accordingly, the district

court dismissed the complaint for lack of jurisdiction.   On
appeal we consider three questions: (1) whether Reschini's appeal

is moot; (2) whether 12 U.S.C. §§ 1464(i)(2)(B) and 1467a(j)

constitute an insurmountable bar to district court subject-matter

jurisdiction over challenges to proxy materials distributed in

connection with the Association's conversion; and (3) if

jurisdiction in the district court is not precluded, whether

dismissal of this suit was nevertheless required on the ground

that the complaint failed to state a cognizable cause of action.




                                I

            In late December of 1993 or early January of 1994,

the Association distributed a notice to its members informing

them that a special meeting would be held on January 28, 1994,

for the purpose of voting on a conversion plan.   Under the plan,

the Association would abandon its federal charter and emerge as a

Pennsylvania-chartered mutual savings bank known as the Indiana

First Savings Bank.   A proxy statement outlining the plan's

business purposes and effects accompanied the notice.

          Depositors in a federally-chartered mutual savings

association are, pursuant to HOLA, members entitled to vote on

proposals to convert to non-federal status,1 notwithstanding that

the proprietary interest of a depositor-member in a mutual

savings association is a chimera.   Depositor-members "own the

1
.   12 U.S.C. § 1464(i)(3)(A)(ii) (discussed infra part III).
mutual, but it is ownership in name only.     They cannot sell what

they 'own,' and if they withdraw savings they receive only the

nominal value of the account rather than a portion of the

mutual's net worth . . . ."    Ordower v. Office of Thrift

Supervision, 

(7th Cir. 1993).    On January 25, 1994,

Robert Reschini, in his capacity as a depositor-member of First

Federal Savings and Loan Association of Indiana, brought suit in

the Western District of Pennsylvania against the Association and

Charles France, the Association's chief executive officer.      Count

I of Reschini's complaint, invoking the district court's federal

question jurisdiction, alleged that the proxy statement, in

contravention of 12 C.F.R. § 569.4, contained false information

regarding the principal business reasons for the proposed

conversion and failed to disclose material information about the

loss of member voting rights that would accompany the conversion.

Reschini sought an injunction against the holding of the special

meeting, an order prohibiting use of the proxy statement and

requiring a legally sufficient proxy solicitation, costs and

attorneys fees, and any other relief deemed just and equitable.

Counts II and III of the complaint asserted state law claims.

          On the day Reschini commenced suit, Reschini also filed

a motion for a temporary restraining order.     The next day,

January 26, 1994, the district court, after a brief hearing,

entered an order dismissing plaintiff's complaint for lack of

subject-matter jurisdiction.    On February 10, 1994, a special
meeting of Association members was held, and the conversion plan

was approved by the members.

          Reschini filed a notice of appeal from the order of the

district court on February 24, 1994.   Oral argument in this

court took place on July 12, 1994.   At the time of oral argument,

the proposed conversion was pending before the OTS but had not

yet been approved.   On October 18, 1994, the Director of the OTS

approved the Association's application for conversion; the same

day the Association completed its conversion to a Pennsylvania-

chartered mutual savings bank.2

          On November 17, 1994, Reschini filed in this court a

petition to modify, terminate, or set aside the order of the OTS

Director approving the proposed conversion.3   We are, however, at

pains to point out that the petition for review  an invocation

of this court's appellate authority with respect to certain

decisions of the OTS Director  has not yet been briefed and

argued and is not the subject of this opinion; in this opinion,

and our concomitant ruling, we address only the decision of the

district court dismissing Reschini's suit against the Association

and France.




2
 . The record on appeal has been supplemented to include these
post-oral-argument events.
3
 . We take judicial notice of the petition for review, filed sub
nom. Reschini v. Office of Thrift Supervision, No. 94-3625 (3d
Cir. filed November 17, 1994).
                                  II

             As a preliminary matter, we address the contention of

the Association and France that this appeal is moot because the

special meeting that Reschini sought to enjoin has already

occurred and the Association has already converted to a

Pennsylvania-chartered savings bank.

             "[I]f an event occurs while a case is pending on appeal

that makes it impossible for the court to grant 'any effectual

relief whatever' to a prevailing party, the appeal must be

dismissed."     Church of Scientology of California v. United

States, 

, 449 (1992) (quoting Mills v. Green, 

, 653 (1895)).     However, "when a court can fashion 'some

form of meaningful relief,' even if it only partially redresses

the grievances of the prevailing party, the appeal is not moot."

Isidor Paiewonsky Assocs., Inc. v. Sharp Properties, Inc., 

, 151 (3d Cir. 1993) (quoting Church of 

).    Such relief need not have been requested in the

pleadings.    Rather, "it is the court's obligation to grant the

relief to which the prevailing party is entitled whether it has

been specifically demanded or not."    Kirby v. United States Dep't
of Housing & Urban Dev., 

, 207 (3d Cir. 1984).

             If we were to find that the district court improperly

dismissed Reschini's complaint and if, upon remand, Reschini were

to prevail on his claim, it would then be the district court's

responsibility to fashion an appropriate decree.    In so doing,
the district court would have the authority to deploy a full

range of equitable remedies including  if deemed feasible and

appropriate  a requirement that the Association and France take

steps to reverse the conversion.     Cf. Mills v. Electric Auto-Lite

Co., 

, 386 (1970) (where a merger is obtained through

fraudulent proxy statements, "[p]ossible forms of relief will

include setting aside the merger or granting other equitable

relief"); Edelman v. Saloman, 

, 1184 (D. Del.

1983) (stating that "a decree nullifying the corporate action

taken on the basis of management's proxies" is a traditional form

of relief in suits alleging fraudulent proxy materials).     While

it is conceivable that the district court might eventually

determine that setting aside the conversion would entail undoing

what cannot equitably be undone, such a determination would

depend upon a fact-specific analysis of the circumstances  an

analysis which we are not now in the position to perform.

             Because setting aside the conversion remains a possible

remedy should Reschini prevail on his claim, Reschini's appeal is

not moot.4
4
 . In arguing that this appeal is moot, appellees cite General
Electric by Levitt v. Cathcart, 

(3d Cir. 1992), a
case which involved allegations of proxy fraud in connection with
the election of corporate directors. Because the directors'
terms had expired several months before appellate argument, we
dismissed the appeal as moot, stating that a court could grant
equitable relief only "by doing the impossible: enjoining the
directors from serving expired terms." General 

. Here, unlike in General Electric, the vote which
utilized the allegedly fraudulent proxy materials continues to
have effect. In General Electric, the directors selected through
the allegedly fraudulent election no longer held their positions
                               III

           Savings association conversions are governed by 12

U.S.C. § 1464(i), codifying § 5(i) of HOLA.   Section § 1464(i)(3)

sets forth criteria governing conversions of federally-chartered

savings associations to state-chartered form (federal-to-state

conversions).   According to these criteria, a federal-to-state

conversion may only be performed "upon the vote in favor of such

conversion cast in person or by proxy at a special meeting of


(..continued)
at the time of appeal. Here, in contrast, the result of the
allegedly fraudulent vote  i.e., the Association's status as a
Pennsylvania-chartered savings bank  remains in force.
          Appellees also cite cases addressing denials of motions
for preliminary injunctions. In these cases, the appeals were
found moot because the actions sought to be enjoined had already
occurred. See Scattergood v. Perelman, 

, 621 (3d
Cir. 1990) ("The merger has taken place, and this court has held
on numerous occasions that when the event sought to be enjoined
in a preliminary injunction has occurred, an appeal from the
order denying the preliminary injunction is moot."); Bank of New
York Co. v. Northeast Bancorp, Inc., 

, 1067 (2d Cir.
1993) ("In general, an appeal from the denial of a preliminary
injunction is mooted by the occurrence of the action sought to be
enjoined.").
          Unlike the situation at bar, these cases addressed
appeals from denials of preliminary relief. In such situations
it is improper for the appeals court to speculate upon other
possible relief available since these issues still lie before the
district court. See Tropicana Products Sales v. Phillips
Brokerage Co., 

, 1582-83 (11th Cir. 1989)
(distinguishing between the relief considered on appeal from the
denial of a motion for preliminary injunction and the relief
considered on appeal from a final judgment on the merits);
Marilyn T., Inc. v. Evans, 

, 1384-85 (5th Cir. 1986)
(rejecting consideration of alternative forms of relief where
this would involve "issues [that] have yet to be resolved by the
district court"). That approach is inapposite where, as here, we
address an appeal from a final judgment.
members or stockholders called to consider such action," pursuant

to
           the law of the State in which the home office
           of the Federal savings association is
           located, as required by such law for a State-
           chartered institution to convert itself into
           a Federal savings association, but in no
           event upon a vote of less than 51 percent of
           all the votes cast at such meeting . . . .

12 U.S.C. § 1464(i)(3).


           Section 1464(i)(2)(B) establishes a mechanism for

judicial review in courts of appeals of orders of the OTS

Director authorizing or barring proposed conversions.

Specifically, § 1464(i)(2)(B) states that "[a]ny aggrieved person

may obtain review of a final action of the Director [of the OTS]

which approves or disapproves a plan of conversion pursuant to

this subsection only by complying with the provisions of section

1467a(j)."   Section 1467a(j) provides in turn for review in

courts of appeals.5




5
.    Section 1467a(j) provides in relevant part:

           Any party aggrieved by an order of the
           Director under this section may obtain a
           review of such order by filing in the court
           of appeals of the United States for the
           circuit in which the principal office of such
           party is located, or in the United States
           Court of Appeals for the District of Columbia
           Circuit, within 30 days after the date of
           service of such order, a written petition
           praying that the order of the Director be
           modified, terminated, or set aside.
           Appellees contend that §§ 1464(i)(2)(B) and 1467a(j),

creating an exclusive review mechanism for review of final

decisions by the Director of the OTS which approve or disapprove

plans of conversion pursuant to "this subsection,"

§ 1464(i)(2)(B), bar district court subject-matter jurisdiction

over Reschini's suit.   The district court accepted this

reasoning, and accordingly dismissed Reschini's claims.6

           On appeal, Reschini disputes this conclusion for two

reasons.   First, Reschini claims that the term "this subsection,"

as employed in § 1464(i)(2)(B)'s review provisions, refers only

to conversions governed by § 1464(i)(2),7 and thus does not cover
6
.   As stated by the district court:

           Under §5(i)(2)(B) of the Home Owners' Loan
           Act (HOLA), 12 U.S.C. §1464(i)(2)(B), an
           aggrieved person must first file his
           objections with the Director of the Office of
           Thrift Supervision and then seek review
           pursuant to 12 U.S.C. §1467a(j). Section
           1467a(j) provides for exclusive jurisdiction
           within the Court of Appeals. 12 U.S.C.
           §1467a(j) (1993); Ordower v. OTS, 

(7th Cir. 1993); Harr v. Prudential
           Savings and Loan Association, 

           (10th Cir. 1977), cert. denied, 

           (1978). Because the Court of Appeals'
           jurisdiction is exclusive, this Court is
           without subject matter jurisdiction.

Reschini v. First Fed. Sav. & Loan Ass'n, No. 94-122 (W.D. Pa.
January 26, 1994).
7
 . Section 1464(i)(2) refers expressly to mutual-to-stock
conversions, but not to federal-to-state conversions. See 12
U.S.C. § 1464(i)(2)(A) ("No savings association may convert from
the mutual to the stock form, or from the stock form to the
mutual form, except in accordance with the regulations of the
Director.").
federal-to-state conversions, which are governed by

§ 1464(i)(3).8   The Association and France contend, however, that

the term "this subsection" refers to § 1464(i) as a whole, not

just to § 1464(i)(2), and that the federal-to-state conversions

governed by § 1464(i)(3) therefore fall within the scope of

§ 1464(i)(2)(B)'s review provisions.   Second, Reschini claims

that even if § 1464(i)(2)(B)'s review provisions do apply to

federal-to-state conversions, challenges in district court to the

accuracy of proxy materials are not barred because such

challenges do not seek review of "a final action of the Director

[of the OTS] which approves or disapproves a plan of conversion."

12 U.S.C. § 1464(i)(2)(B).    We examine the second of these two

claims first.

          The question whether a suit challenging the accuracy of

proxy materials submitted in respect of a savings association

conversion constitutes a challenge to OTS action was considered

by the Seventh Circuit in Ordower v. Office of Thrift

Supervision, 

(7th Cir. 1993).   Ordower concerned a

federal savings association which gained approval both from the

OTS and from its depositor-members to change from mutual status

to stock status.   Following the conversion, two depositors

commenced two contemporaneous actions.   One was a suit in a

federal district court in Illinois which alleged that the

association had utilized misleading proxy statements in seeking

8
.   See 

for text of § 1464(i)(3).
association members' approval of the conversion; the district

court dismissed the suit for lack of subject-matter jurisdiction.

The other was a petition for review filed in the Seventh Circuit

challenging, on numerous grounds, the OTS Director's approval of

the conversion.     The Seventh Circuit consolidated the appeal from

the district court and the petition for review, disposing of both

in one opinion.     The court found no fault in the order of the OTS

Director; but the court held that the district court had

jurisdiction to entertain the challenge to the proxy materials,

and accordingly remanded that lawsuit for further proceedings.

             In examining whether the district court had subject-

matter jurisdiction over the depositors' suit alleging the

fraudulent use of proxy materials, the Ordower court made a

distinction between challenges to the accuracy of proxy materials

and challenges to the substance of a conversion plan.     With

respect to challenges to the substance of a conversion plan, the

court confirmed that § 1464(i)(2)(B) places exclusive

jurisdiction in courts of appeals.     "When Congress places review

of an administrative decision in the court of appeals, district

judges may not enjoin or penalize action that the agency has

approved or that is the natural outcome of the agency's

decision."    

(citing FCC v. ITT World
Communications, Inc., 

(1984) and Whitney Nat'l Bank

v. Bank of New Orleans & Trust Co., 

(1965)).        In

contrast, because the OTS does not make a finding with respect to
the accuracy of proxy materials, challenges to such materials

could be entertained in the district court.9

9
 . In deriving this conclusion, the Ordower court relied upon
the regulations governing mutual-to-stock conversions, codified
at 12 C.F.R. § 563b, as well as upon analogy to the practice of
the Securities and Exchange Commission:

          The OTS does not review the accuracy of
          materials by which management solicits the
          depositors' approval. . . . Similarly the
          SEC looks over corporate proxy materials
          without approving them. Defects in these
          materials may be challenged in a district
          court even though the court of appeals is the
          exclusive forum for review of the SEC's
          decisions. . . . That the OTS has found the
          substance of a transaction in compliance with
          federal law  which is all the OTS's
          approval establishes  does not relieve the
          bank's managers of the duty to tell the truth
          when asking the depositors to approve the
          transaction. . . . A district court
          accordingly may consider whether the
          materials describing the transaction and
          soliciting that approval were complete and
          accurate.

(citations omitted).
          Harr v. Prudential Savings and Loan Ass'n, 

(10th Cir. 1977), cert. denied, 

(1978), supports
the position taken in Ordower. There, the Tenth Circuit affirmed
a district court's dismissal of a claim for materially misleading
proxy statements on the basis of 12 U.S.C. §§ 1730a(k) and
1725(j)(4) (the appeals court review provisions which served as
precursors to 12 U.S.C. §§ 1464(i)(2)(B) and 1467a(j)). The
court "assumed that the private remedies available under SEC 14A
as to fraud also exist under the counterpart Bank Regulations,"

; however, the Tenth Circuit found
dismissal appropriate because the suit was "in reality . . . a
challenge to the Bank Board's decision [to approve a mutual-to-
stock savings association conversion] although cast in terms of
Rule 10b-5," 

  This analysis is consistent with the
Ordower court's limitation on the kind of attacks the depositor-
member in that case could make on the allegedly false proxy
materials. See 

("Ordower may not wage
          We find that in the context of the Association's

proposed federal-to-state conversion, as in the context of the

mutual-to-stock conversion considered by Ordower, a suit

challenging the accuracy of proxy materials does not seek to

"enjoin or penalize action that the agency has approved or that

is the natural outcome of the agency's decision."   

.   OTS approval of the Association's application was

governed by the expedited treatment process set forth in 59 Fed.

Reg. 44,625 (Aug. 30, 1994) (to be codified at 12 C.F.R.

§ 563.22(b)(1)(ii)) and 12 C.F.R. § 516.3(a).10   According to the


(..continued)
a collateral attack on the valuation approved by the OTS by
describing the repetition of that valuation in the proxy
materials as a form of fraud or deceit.").
          Similarly, in Craft v. Florida Federal Savings & Loan
Ass'n, 

(11th Cir. 1986), the Eleventh Circuit
dismissed a challenge to proxy statements as comprising "bare
bones allegations made to escape the exclusive review provisions
of the Review Statutes." 

. However, the
court noted that it was "not called upon here to decide, nor . .
. express any views concerning the jurisdiction vel non of the
district court under the federal securities laws when securities
fraud is properly alleged . . . ." Id.; cf. Rembold v. Pacific
First Fed. Sav. Bank, 

, 1311 (9th Cir. 1986)
(holding that "an order approving an application of a conversion
plan does not relate in any way to the right of the purchaser of
stock to seek damages against the savings institutions for any
misrepresentations in the offering circular").
10
 . See Letter from Diana Garmus, Deputy Assistant Director,
Corporate Activities, OTS, to Daniel Weitzel, counsel for
appellees, of October 18, 1994 ("Pursuant to Section
563.22(b)(1)(ii)(1994) . . . associations meeting the criteria
for expedited processing under the OTS applications processing
regulations (12 C.F.R. § 516.3(a)) may consummate a Sasser
Conversion after filing a notification with the OTS at least 30
days prior to the Sasser Conversion. We believe that the
Association is subject to the above referenced regulations and
expedited treatment process, "a savings association . . . may

engage in activities upon filing a notice with the OTS together

with any necessary certifications.   For these activities, a

notice will be all that is required and an association may engage

in the activity unless the OTS objects within 30 days."     12

C.F.R. § 516.3(a)(2) (1994).   The regulations elaborating upon

the necessary "notification" state that "[t]he notification may

be in the form of either a letter describing the material

features of the transaction or a copy of a filing made with

another Federal or state regulatory agency seeking approval from

that agency for the transaction . . . ."   59 Fed. Reg. 44,626

(Aug. 30, 1994) (to be codified at 12 C.F.R. § 563.22(h)(1)).

          There is no indication that findings with respect to

the accuracy of proxy materials are part of the expedited

treatment process.   Rather, as in the mutual-to-stock context

considered in Ordower, the regulations which governed approval of

the Association's federal-to-state conversion address the
(..continued)
meets the criteria for expedited processing and 30-day
notification to the OTS.")
          This case has been complicated by the fact that the OTS
regulatory structure governing federal-to-state conversions was
amended during the pendency of this appeal. Prior to the
adoption of the regulations published in the Federal Register on
August 30, 1994, 59 Fed. Reg. 44,615-27, federal-to-state
conversions of mutual savings associations were governed by the
criteria codified at 12 C.F.R. § 571.5. See Letter from V.
Gerard Comizio, Deputy Chief Counsel, Corporate and Securities
Division, OTS, to Thomas Leahey, counsel for appellees, of May
26, 1994. Because the OTS letter communicating approval of the
Association's proposed conversion applied the recently adopted
regulations, we analyze this case according to those regulations.
substance of the conversion plan, but not the process by which

that plan is approved by the depositor-members.     Accordingly, we

conclude that HOLA's provision for court of appeals review of any

final OTS action that "approves or disapproves a plan of

conversion," 12 U.S.C. § 1464(i)(2)(B), does not, of its own

force, bar district court jurisdiction over allegations of

materially false or misleading proxy materials.11

          Because we find that § 1464(i)(2)(B)'s court of appeals

review provisions, assuming they govern federal-to-state


11
 . The record suggests that OTS consideration of the
Association's proposed conversion included some review of the
proxy materials. On September 13, 1994, the OTS extended the
applicable time period for OTS consideration of the conversion
plan because of "significant issues of law and policy regarding
whether the solicitation for proxies made by or on behalf of the
association's board of directors complied with OTS proxy rules."
Letter from Diana Garmus, Deputy Assistant Director, Corporate
Activities, OTS, to Daniel Weitzel, counsel for appellees, of
September 13, 1994.
          The October 18, 1994 letter approving the conversion,
however, indicates no findings with respect to the proxy
materials. See Letter from Diana Garmus, Deputy Assistant
Director, Corporate Activities, OTS, to Daniel Weitzel, counsel
for appellees, of October 18, 1994. Moreover, mere examination
of proxy materials by the OTS does not imply OTS findings with
respect to the accuracy of the statements contained within. Cf.
12 C.F.R. § 563b.5(g)(2) (applying to mutual-to-stock
conversions) ("The fact that a proxy statement, form of proxy or
other soliciting material has been filed with or examined by the
Office and authorized for use shall not be deemed a finding by
the Office that such material is accurate or complete or not
false or misleading . . . ."). In the absence of regulatory
provisions requiring OTS approval of proxy materials as well as
any explicit findings by the OTS regarding the Association's
proxy materials, we find the limited review which may have
occurred inadequate to constitute OTS approval of the accuracy of
the Association's proxy materials.
conversions, do not bar subject-matter jurisdiction in the

district court over Reschini's claims, we do not reach Reschini's

alternative contention  that is, that conversions governed by

§ 1464(i)(3) fall outside the scope of § 1464(i)(2)(B)'s review

provisions.12

          In short, if count I of Reschini's complaint 

alleging that the Association and France distributed a proxy

statement that was both false and incomplete  states a

cognizable federal claim, the district court had subject-matter

jurisdiction to entertain that claim.    To the question whether

count I states a cognizable federal claim we now turn.




                                  IV

          Arguing in the alternative, the Association and France

contended in the district court that, even if the district court

had jurisdiction to entertain Reschini's suit, the suit should

nevertheless be dismissed because no implied private cause of

action exists under 12 C.F.R. § 569.4, the OTS regulation invoked

by Reschini in count I of his complaint as the source of his

asserted federal claim.    Because the district court found that it

lacked subject-matter jurisdiction over Reschini's suit, the

district court had no occasion to consider this alternative

contention.     As appellees, the Association and France have

12
 .   

text accompanying notes 7-8.
renewed this contention here.    Having determined that the

district court, as a matter of subject-matter jurisdiction, is

not precluded from entertaining Reschini's suit, we could remand

to the district court the question whether HOLA contemplates such

a suit.    But remand would, in all likelihood, result in a

subsequent appeal again presenting the same question.       Because

the question is one of law, considerations of judicial economy

lead us to address the issue now.

            Reschini bases his claim on 12 C.F.R. § 569.4

(hereafter "Section 569.4" or "§ 569.4"), which provides as

follows:

            No solicitation of a proxy shall be made by
            means of any statement, form of proxy, notice
            of meeting, or other communication, written
            or oral, which . . .

            (c)(1) Contains any statement that is false
            or misleading with respect to any material
            fact, or
            (2) Omits to state any material fact:
            (i) Necessary in order to make the statements
            therein not false or misleading or
            (ii) Necessary to correct any statement in
            any earlier communication with respect to the
            solicitation of a proxy for the same meeting
            or subject matter that has subsequently
            become false or misleading.



Section 569.4 was one of a number of regulations issued by the

OTS in 1989, the year in which Congress, through the Financial

Institutions Reform, Recovery, and Enforcement Act (FIRREA),

abolished the Federal Home Loan Bank Board (FHLBB) and created
the OTS, both to take the place of the FHLBB and to carry on

other regulatory functions.13   Section 569.4 had originally been

promulgated by the FHLBB in 1971 pursuant to the FHLBB's general

regulatory authority under the National Housing Act and had

applied to savings institutions insured by the Federal Savings

and Loan Insurance Corporation (FSLIC).14   In 1989, the OTS

repromulgated § 569.4 pursuant to its general regulatory

authority under HOLA; as repromulgated, § 569.4 applies to all

savings associations.15

13
 . FIRREA reorganized the administrative structure applicable
to savings associations by (1) dissolving the FHLBB; (2) creating
the Office of Thrift Supervision, under the administration of the
Department of Treasury, to serve as the successor to the FHLBB's
former regulatory and chartering functions; and (3) transferring
the insurance function of the Federal Savings and Loan Insurance
Corporation to the Federal Deposit Insurance Corporation. See
H.R. Rep. No. 54(I), 101st Cong., 1st Sess. 293 (1989), reprinted
in 1989 U.S.C.C.A.N. 86, 106.
14
 . The regulations were promulgated pursuant to the FHLBB's
authority to regulate the FSLIC under sections 402, 403, and 407
of the National Housing Act, formerly codified at 12 U.S.C.
§§ 1725, 1726, and 1730. See 36 Fed. Reg. 19,973 (October 14,
1971) (citing 12 U.S.C. §§ 1725, 1726, and 1730 as statutory
authority for the regulations). Section 402 vested direction of
the FSLIC in the FHLBB. Section 403 authorized the FSLIC to
insure the accounts of federal savings and loan associations.
Section 407, among other things, authorized the FSLIC to
terminate the insured status of any institution engaged "in an
unsafe or unsound practice" or which found itself "in an unsafe
or unsound condition to continue operations as an insured
institution." § 407(b)(1).
15
 . The OTS repromulgated the regulations pursuant to its
general regulatory authority under HOLA, codified at 12 U.S.C.
§§ 1462, 1462a, and 1463. See 12 C.F.R. § 569 (1994) (citing 12
U.S.C. §§ 1462, 1462a, and 1463 as statutory authority).
Section 1462 defines terms. Section 1462a establishes the OTS
and the position of Director of the OTS. Section 1463 confers on
          The language of § 569.4 closely tracks that of SEC Rule

14a-9, 17 C.F.R. § 240.14a-9,16 issued pursuant to section 14(a)

of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a).17

(..continued)
the Director general authority to regulate savings associations
and to prescribe accounting and disclosure standards for savings
associations.
16
 .   17 C.F.R. § 240.14a-9 provides in relevant part:

          No solicitation subject to this regulation
          shall be made by means of any proxy
          statement, form of proxy, notice of meeting,
          or other communication written or oral,
          containing any statement which, at the time
          and in the light of the circumstances under
          which it is made, is false or misleading with
          respect to any material fact, or which omits
          to state any material fact necessary in order
          to make the statements therein not false or
          misleading or necessary to correct any
          statement in any earlier communication with
          respect to the solicitation of a proxy for
          the same meeting or subject matter which has
          become false or misleading.
17
 . Section 14(a) of the 1934 Act, 15 U.S.C. § 78n(a), provides
that

          It shall be unlawful for any person, by the
          use of the mails or by any means or
          instrumentality of interstate commerce or of
          any facility of a national securities
          exchange or otherwise, in contravention of
          such rules and regulations as the Commission
          may prescribe as necessary or appropriate in
          the public interest or for the protection of
          investors, to solicit or to permit the use of
          his name to solicit any proxy or consent or
          authorization in respect of any security
          (other than an exempted security) registered
          pursuant to section 78l of this title.
Rule 14a-9, taken together with its statutory parent, was found

by the Court in J.I. Case Co. v. Borak, 

(1964), to

support a private cause of action for materially misleading proxy

statements.




                                  A

         Borak was decided in 1964.        It is still good law as a

construction of the 1934 Act and Rule 14a-9.      However, it is not

clear that Borak, if it arose for the first time today, would be

decided the same way.    See Touche Ross & Co. v. Redington, 

, 578 (1979) ("[S]ince Borak we have adhered to a

stricter standard for the implication of private causes of action

. . . .").    Starting in 1974, in Cort v. Ash, 

(1975),

the Court has in a series of decisions developed the governing

law on the implication, within the interstices of federal

statutes and regulations, of private causes of action.      Cort v.

Ash directed courts to consider four factors  whether (1) "the

plaintiff [is] 'one of the class for whose especial benefit the

statute was enacted'"; (2) "there [is] any indication of

legislative intent . . . to create such a remedy or to deny one";

(3) "it [is] consistent with the underlying purposes of the

legislative scheme to imply such a remedy"; and (4) "the cause of

action [is] one traditionally relegated to state law."      

(citations omitted).       However, as the Court observed
in Touche Ross, "the [Cort] Court did not decide that each of

these factors is entitled to equal weight.    The central inquiry

remains whether Congress intended to create, either expressly or

by implication, a private cause of action."   Touche 

.   See also Virginia Bankshares, Inc. v. Sandberg, 

, 1102 (1991) ("The rule that has emerged in the years

since Borak and Mills came down is that recognition of any

private right of action for violating a federal statute must

ultimately rest on congressional intent to provide a private

remedy.") (citing Touche 

).

          In light of developments since Borak, the question

whether a private cause of action for depositor-members of mutual

savings associations is implied under § 569.4's proxy provisions

must begin with an examination of congressional intent.

          Reschini has not identified any provision of HOLA or

the National Housing Act that indicates congressional intent "to

create, either expressly or by implication," a private cause of

action.   Our own examination has been no more fruitful.   In

particular, we find nothing in the provisions constituting the

statutory footing for § 569.4 that is supportive of a private

cause of action.18

          Reschini contends, however, that § 569.4 is a

regulatory embodiment of a "specific congressional intent," Brief

of Roger R. Reschini, Appellant, at 8 n.7, located not in HOLA or

18
 .   

notes 14-15.
the National Housing Act, but in 1974 amendments to the

Securities Exchange Act of 1934.    Specifically, Reschini asserts

that language added to § 12(i) in 1974 requires the implication

of a private cause of action under § 569.4's proxy provisions.

          Section 12(i)  a 1964 addition to the 1934 Act 

authorizes certain non-SEC agencies to administer the 1934 Act's

provisions with respect to securities issued by institutions over

which these agencies have regulatory authority.19   As originally

adopted, § 12(i) did not grant any regulatory authority to the

FHLBB.   Congress remedied this omission in 1974, however,

providing regulatory authority to the FHLBB over securities

issued by institutions whose accounts were insured by the FSLIC.

Pub. L. No. 93-495, § 105(b), 88 Stat. 1500, 1503-04 (1974),

codified at 15 U.S.C. § 78l(i).    Section § 12(i) was again

amended in 1989 via FIRREA; in the amended version, the OTS was

substituted for the FHLBB and was given regulatory authority with

respect to securities issued by institutions whose accounts are


19
 .   As added in 1964, § 12(i) vested the SEC's "powers,
functions, and duties" (1) with respect to national and District
of Columbia banks, in the Comptroller of the Currency; (2) with
respect to all other member banks of the Federal Reserve System,
in the Board of Governors of the Federal Reserve System; and (3)
with respect to all other insured banks, in the Federal Deposit
Insurance Corporation. Pub. L. No. 88-467, § 3(e), 78 Stat. 565,
568-569 (1964), codified at 15 U.S.C. § 78l(i). The provision
contemplated "extend[ing] disclosure protection to investors in
[bank] securities and at the same time [providing] for full
coordination with the safeguards provided by the Federal bank
regulatory structure." S. Rep. No. 379, 88th Cong., 1st Sess. 31
(1963).
insured by the Federal Deposit Insurance Corporation.     See 15

U.S.C. § 78l (Historical and Statutory Notes, 1989 Amendment).

          The 1974 amendment to § 12(i), in addition to its grant

of regulatory authority to the FHLBB, added language directing

the non-SEC agencies to issue regulations "substantially similar"

to those promulgated by the SEC pursuant to numerous sections of

the 1934 Act, including § 14(a):
          In carrying out their responsibilities under
          this subsection, the agencies named . . .
          shall issue substantially similar regulations
          to regulations and rules issued by the [SEC]
          under sections 12, 13, 14(a), 14(c), 14(d),
          14(f) and 16 [of the 1934 Act], unless they
          find that implementation of substantially
          similar regulations with respect to insured
          banks and insured institutions [is] not
          necessary or appropriate in the public
          interest or for protection of investors, and
          publish such findings, and the detailed
          reasons therefor, in the Federal Register.


15 U.S.C. § 78l(i).   For the reasons that follow, we disagree

with Reschini's contention that § 12(i)'s "substantially similar"

language provides the requisite congressional intent to create a

private cause of action under § 569.4 for depositor-members of

mutual savings associations.

          First, while Reschini's argument for a private cause of

action under OTS proxy regulations may have merit insofar as it

applies to proxy regulations issued pursuant to § 12(i)'s

mandate,20 § 569.4 is not such a regulation.   As described above,

20
 . Cf. 12 C.F.R. § 563d (citing § 12 of the 1934 Act as
statutory authority). Those regulations provide in part:
§ 569.4   was originally adopted in 1971 pursuant to the general

FHLBB's general regulatory authority under the National Housing

Act  three years before § 12(i) was amended to give the FHLBB

authority to administer the 1934 Act's securities provisions.

When § 569.4 was promulgated anew by the OTS in 1989, the OTS

cited its general regulatory authority under HOLA.   On neither

occasion was § 12(i) of the 1934 Act mentioned as authority for

the regulation.

           Second, the 1934 Securities Exchange Act provisions are

simply not relevant to the ownership interests held by Reschini.

The 1934 Act establishes a statutory scheme covering certain

types of securities.   Originally, the 1934 Act applied only to

securities traded on national securities exchanges; in 1964,

Congress passed the Securities Act Amendments which extended the

1934 Act's protections and requirements to include many over-the-

counter securities as well.   See S. Rep. No. 379, 88th Cong., 1st
(..continued)
          In respect to any securities issued by
          savings associations, the powers, functions,
          and duties vested in the Securities and
          Exchange Commission (the "Commission") to
          administer and enforce sections 12, 13,
          14(a), 14(c), 14(d), 14(f), and 16 of the
          Securities Exchange Act of 1934 (the "Act")
          are vested in the Office. The rules,
          regulations and forms prescribed by the
          Commission pursuant to those sections or
          applicable in connection with obligations
          imposed by those sections, shall apply to
          securities issued by savings associations,
          except as otherwise provided in this part.

12 C.F.R. § 563d.1.
Sess. 1 (1963) (a "primary objective" of the 1964 amendments is

to "improve investor protection by extending to the larger

companies in the over-the-counter market the registration,

reporting, proxy solicitation, and insider trading requirements

now applicable to companies listed on an exchange").21

          Reschini's ownership interest, however, is not among

those types of securities covered by the 1934 Act's protections,

even as expanded in 1964.   When, in 1964, Congress extended the

1934 Act's protections to certain over-the-counter securities, it

specifically excluded from coverage "any security, other than

permanent stock, guaranty stock, permanent reserve stock, or any

similar certificate evidencing nonwithdrawable capital, issued by

a savings and loan association."   15 U.S.C. 78l(g)(2)(C).   Given

that § 12(i) directs regulatory agencies to issue "substantially

similar" regulations to those of the SEC in the context of

"carrying out their responsibilities under this subsection," it

would be anomalous to find that this language evidences

congressional intent to create a private cause of action with



21
 . Accordingly, the Securities Act Amendments (1) added
registration requirements for most securities with certain
minimum assets and number of stockholders, 15 U.S.C. § 78l(g);
and (2) amended the disclosure requirements to encompass all
registered securities. For example, § 14(a)'s language, which
previously applied to proxies in respect of any nonexempt
security "registered on any national securities exchange" was
amended to apply to any nonexempt security "registered pursuant
to section 12 of this title." See 15 U.S.C. § 78n (Historical
Note, 1964 Amendment).
respect to ownership interests outside the 1934 Act's

protections.22

          Because § 569.4 was not promulgated pursuant to § 12(i)

of the 1934 Act, and because the 1934 Act does not even apply to

the ownership interests of depositor-members in mutual savings

associations, we find no evidence in § 12(i) of congressional

intent to create a private cause of action for depositor-members

of mutual savings associations under § 569.4.


                                 B

          In the preceding section of this opinion we have

addressed, as the touchstone issue, the question of congressional

intent to establish a private cause of action.   But there is a

further issue to be addressed.   Bearing in mind that  as in

Borak  certain private causes of action were judicially implied

in the pre-Cort era when congressional intent was "not . . . the

considered focus," Virginia Bankshares, Inc. v. Sandberg, 

, 1102 (1991), the question arises whether the non-

implication of a private cause of action would be "demonstrably




22
 . In King v. Edwards, 

(N.D. Ga. 1982), the
court concluded that the 1974 amendment to § 12(i) provided
evidence of congressional intent to create a private cause of
action under FHLBB proxy rules. 

. For
the reasons set forth in the text, we disagree with this
reasoning insofar as it applies to depositor-members of federal
mutual savings associations seeking to convert to state-chartered
form.
inequitable to a class of would-be plaintiffs with claims

comparable to those previously recognized," 

          [W]here a legal structure of private
          statutory rights has developed without clear
          indications of congressional intent, the
          contours of that structure need not be frozen
          absolutely when the result would be
          demonstrably inequitable to a class of would-
          be plaintiffs with claims comparable to those
          previously recognized. Faced in that case
          with such a claim for equality in rounding
          out the scope of any implied private
          statutory right of action, we [look] to
          policy reasons for deciding where the outer
          limits of the right should lie.

(discussing Blue Chip Stamps v. Manor Drug Stores,

(1975)).

          The "previously recognized" cause of action to which

Reschini's claim might be compared is that implied by the Borak

Court under SEC Rule 14a-9.   Reschini's claim, like the claim at

issue in Borak, involves an allegation of materially misleading

proxy statements.   Unlike the proxy statements in Borak, however,

the proxy statements of which Reschini complains are not subject
to the proxy disclosure provisions of the 1934 Act.   As discussed

above, securities issued by savings associations  with the

exception of certain types of securities not relevant here  are

expressly excluded from coverage of the Act's requirements and

protections.   15 U.S.C. § 78l(g)(2)(C).

           We find this difference to be significant.   When

Congress exempted accounts in savings and loan associations from
the 1934 Act's requirements, it did so on the basis of an

important distinction between such accounts and other types of

securities: the lack of a trading interest.   See S. Rep. 379,

88th Cong., 1st Sess. at 61 (1963) (explaining the exemption for

"share accounts in savings and loan associations" on the basis

that "[t]here is normally no trading interest in . . . [this

category] of securities").   The Ordower court also discussed the

insubstantial nature of the ownership interests held by

depositor-members of a mutual savings association.23   These

characteristics lead us to conclude that Reschini's ownership

interest in his savings account is not sufficiently comparable to

the interests of persons with claims under SEC Rule 14a-9 such

that the failure to recognize a private cause of action would be

"demonstrably inequitable."24


23
 .   

text following note 1.
24
 . Reschini's reliance on Ordower with respect to implication
of a private cause of action is inapposite. There, after ruling
on the jurisdictional question discussed in Part 

, the
court held that a challenge to the accuracy of proxy materials
used in a mutual-to-stock conversion could be brought in a
district court, thus suggesting the existence of a private cause
of action. 

.
           Ordower, however, concerned different proxy
regulations, those at 12 C.F.R. § 563b, in the context of a
mutual-to-stock, rather than a federal-to-state, conversion.
Mutual-to-stock conversions, which result in securities to which
the 1934 Act's registration and disclosure requirements apply,
are regulated in part by the 1934 Act's requirements. See 12
C.F.R. § 563b (citing 1934 Act provisions as statutory authority
for regulations governing mutual-to-stock conversions). Federal-
to-state conversions of mutual savings associations, in contrast,
have no connection with the issuance of securities protected by
the 1934 Act. Thus, Ordower is not authority for implying a
                                C

          Our analysis has revealed no evidence of congressional

intent to create a private cause of action under § 569.4 for

depositor-members of mutual savings associations.   Moreover, we

are not persuaded that non-implication of a private cause of

action would create a situation "demonstrably inequitable" to

such depositor-members.   Thus, we conclude that count I of

Reschini's complaint does not state a federal claim on which

relief can be granted.




                                V

          Accordingly, albeit because of the absence of a

cognizable federal cause of action rather than for lack of

subject-matter jurisdiction, the judgment of the district court

dismissing Reschini's complaint will be affirmed.




(..continued)
private cause of action under 12 C.F.R. § 569.4 in the context of
federal-to-state conversions of mutual savings associations.