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RESOLUTION TRUST CORPORATION v. JOSEPH A. FRATES </h1> <p class="docCourt"> </p> <p> August 11, 1995 </p> <p class="case-parties"> <b>RESOLUTION TRUST CORPORATION, APPELLEE<br><br>v.<br><br>JOSEPH A. FRATES, APPELLANT</b><br><br> </p> <div class="caseCopy"> <div class="facLeaderBoard"> <script type="text/javascript"><!-- google_ad_client = "ca-pub-1233285632737842"; /* FACLeaderBoard */ google_ad_slot = "8524463142"; google_ad_width = 728; google_ad_height = 90; //--> </script> <script type="text/javascript" src=""> </script> </div class="facLeaderBoard"> <div class="numbered-paragraph"><p><br> Appeal from the United States District Court for the District of Columbia (92ms00499)</p></div> <div class="numbered-paragraph"><p> Before Edwards, Chief Judge, and Wald and Buckley, Circuit Judges.</p></div> <div class="numbered-paragraph"><p> Buckley, Circuit Judge</p></div> <div class="numbered-paragraph"><p> FOR PUBLICATION</p></div> <div class="numbered-paragraph"><p> FOR THE DISTRICT OF COLUMBIA CIRCUIT</p></div> <div class="numbered-paragraph"><p> Argued January 19, 1995</p></div> <div class="numbered-paragraph"><p> Opinion for the court filed by Circuit Judge Buckley.</p></div> <div class="numbered-paragraph"><p> Joseph A. Frates, a former director and officer of a failed savings and loan institution, appeals from a district court order enforcing a subpoena duces tecum issued by the Resolution Trust Corporation ("RTC"). He challenges the propriety of that order principally on the grounds that the subpoena improperly sought information about his personal finances for the purpose of determining his capacity to pay a judgment in the event the RTC should find him liable to the institution. Because the district court correctly found that the information sought was relevant to other purposes of the RTC's investigation and because Mr. Frates failed to make a sufficient offer of proof in support of his allegation that the RTC had acted in bad faith, we affirm the district court's order enforcing the subpoena.</p></div> <div class="numbered-paragraph"><p> I. Background</p></div> <div class="facAdFloatLeft"> <script type="text/javascript"><!-- google_ad_client = "ca-pub-1233285632737842"; /* FACContentLeftSkyscraperWide */ google_ad_slot = "1266897617"; google_ad_width = 160; google_ad_height = 600; //--> </script> <script type="text/javascript" src=""></script> </div class="facLeaderBoard"> <div class="numbered-paragraph"><p> Six years ago, Congress created the RTC as part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which it enacted in response to a nationwide epidemic of insolvencies in the savings and loan industry. See RTC v. Thornton, 41 F.3d 1539, 1542 (D.C. Cir. 1994); RTC v. Walde, 18 F.3d 943, 944 (D.C. Cir. 1994). The Act authorizes the Director of the Office of Thrift Supervision ("OTS") to appoint the RTC as receiver of failed savings and loan institutions ("S&Ls"). 12 U.S.C. Section(s) 1821(c)(6)(A) & (B) (1994). In that capacity, the RTC succeeds to all of the failed institution's "rights, titles, powers, and privileges...." Id. Section(s) 1821(d)(2)(A)(I). When acting as a receiver, the RTC may take steps to "preserve and conserve the assets and property of such institution[s]." Id. Section(s) 1821(d)(2)(B)(iv). To that end, Congress empowered the RTC to avoid fraudulent asset transfers, id. Section(s) 1821(d)(17); assert claims against an S&L's directors and officers, id. Section(s) 1821(k); seek a court order attaching assets, id. Section(s) 1821(d)(18); and issue administrative subpoenas duces tecum, id. Section(s) 1821(d)(2)(I) & 1818(n) (1994).</p></div> <div class="numbered-paragraph"><p> Mr. Frates owned all the common stock of Equivest Financial Corporation, a holding company that in turn controlled State Federal Savings and Loan Association ("State Federal"), a federal S&L with offices in Tulsa, Oklahoma. From January 1987 to October 1989, Frates served as a director of State Federal. He also served on several of its management committees.</p></div> <div class="numbered-paragraph"><p> In February 1990, the OTS placed State Federal in receivership and the RTC took over as its receiver. The RTC then initiated an investigation to determine (1) whether former officers, directors, or others who provided services to or otherwise dealt with State Federal might be liable to it; (2) whether the RTC should seek to avoid any transfers of assets; (3) whether the RTC should attach any assets; and (4) whether pursuit of any potential litigation would be cost-effective. Pursuant to that investigation, in 1991 the RTC served an administrative subpoena duces tecum on Mr. Frates, who objected to some of its requests and complied with others. On November 24, 1992, the RTC served a second administrative subpoena duces tecum on Mr. Frates, which sought a broad range of information relating to the management of State Federal and Mr. Frates' personal finances. Mr. Frates raised a number of objections to the second subpoena. In a letter dated December 8, 1992, the RTC rejected the objections and directed Mr. Frates to comply with the subpoena's requests. Six days later, it filed a petition for enforcement in the U.S. District Court for the District of Columbia.</p></div> <div class="numbered-paragraph"><p> On December 16, 1992, Judge Stanley S. Harris issued an ex parte order to show cause why the court should not grant the petition and, after oral argument, ordered the subpoena enforced. Mr. Frates filed a timely notice of appeal from that order; and the RTC consented to a stay pending our disposition in RTC v. Walde, a case concerning the RTC's use of its subpoena power in similar circumstances. Meanwhile, on or about February 16, 1992, because the statute of limitations was about to expire on certain potential claims, the RTC filed a civil action against Mr. Frates in the U.S. District Court for the Northern District of Oklahoma.</p></div> <div class="numbered-paragraph"> <p> After the issuance of our decision in Walde, we remanded the subpoena enforcement order to Judge Harris for reconsideration in light of our holding in that case. On remand, Judge Harris once again issued an order enforcing the subpoena, RTC v. Frates, 860 F. Supp. 5, 6 (D.D.C. 1994), and Mr. Frates again appealed. He now raises numerous challenges to the district court's ...</p> </div> </div> </div> <div id="caseToolTip" class="caseToolTip" style="display: none;"> <div class="toolTipHead"> </div> <div class="toolTipContent"> <p> Our website includes the first part of the main text of the court's opinion. To read the entire case, you must purchase the decision for download. 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