## Facts

- Lincoln Savings and Loan Association (Lincoln) was a California-chartered thrift whose deposits were federally insured and that was wholly owned by American Continental Corporation (ACC).
- During a period of deregulation, Lincoln engaged in widespread fraud and misconduct and pursued aggressive, high-risk, nontraditional investments and transactions.
- Lincoln’s internal controls failed: employees in its accounting and legal departments did not stop the misconduct and did not cooperate with regulators seeking to supervise Lincoln’s activities.
- Lincoln’s financial condition deteriorated to the point of insolvency.
- On April 14, 1989, the Federal Home Loan Bank Board (FHLBB), acting under 12 U.S.C. § 1464(d)(6)(A), appointed a conservator to take control of Lincoln after finding that Lincoln was in an unsafe and unsound condition and that there had been substantial dissipation of assets or earnings due to violations of law or unsafe or unsound practices.
- On August 2, 1989, the FHLBB replaced the conservator with a receiver.
- The Office of Thrift Supervision (OTS) later became the successor regulator.
- ACC and Lincoln filed consolidated actions in the U.S. District Court for the District of Columbia seeking an order removing the conservator and receiver and restoring operational control of Lincoln to its prior owners and management.
- The court reviewed the regulator’s action on the administrative record, which included detailed findings about risky and allegedly improper transactions that regulators concluded harmed Lincoln and threatened depositors and the insurance fund.

## Issues

1. Whether the federal thrift regulator had a legally sufficient, record-supported basis under 12 U.S.C. § 1464(d)(6)(A) to appoint a conservator and later a receiver for Lincoln based on findings of unsafe and unsound conditions and substantial dissipation of assets or earnings due to violations of law or unsafe or unsound practices.
2. Whether the court should order removal of the conservator and receiver and return control of Lincoln to ACC and Lincoln’s former management.

## Decision

- The court denied the relief sought by ACC and Lincoln and left the conservatorship and receivership in place.
- The court held that the regulator’s statutory findings were supported by the administrative record and that the regulator acted within its lawful authority in appointing both a conservator and a receiver.
- The court declined to substitute its judgment for the regulator’s judgment about the risks posed by Lincoln’s condition and operations.

## Legal Principles

- Under 12 U.S.C. § 1464(d)(6)(A), a federal thrift regulator may appoint a conservator or receiver upon specified findings, including that an institution is in an unsafe and unsound condition or that there has been substantial dissipation of assets or earnings due to legal violations or unsafe or unsound practices.
- Judicial review of a conservatorship or receivership appointment is limited; the court evaluates whether the regulator had a reasonable basis in the administrative record for its statutory findings and action.
- Courts give significant deference to the regulator’s technical and supervisory judgments about institutional safety and soundness and threats to depositors and the insurance fund.
- If the administrative record supports the regulator’s determination that statutory grounds exist, a court will not order removal of the conservator or receiver or restore the institution to prior control.

## Conclusion

Lincoln Savings & Loan Association v. Wall upheld the federal regulator’s takeover of Lincoln because the administrative record supported findings that Lincoln had operated in an unsafe and unsound manner and had suffered substantial dissipation of assets or earnings through unlawful conduct and unsafe practices; given the limited scope of review and the deference owed to supervisory determinations, the court refused to remove the conservator and receiver or return Lincoln to its former owners and management.


Lincoln Savings & Loan Association v. Wall, 743 F. Supp. 901 (1990)