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BOARD OF GOVERNORS, FRS v. MCORP FINANCIAL, INC. Opinion of the Court
Southern District of Texas and all bankruptcy proceedings were later consolidated in that forum. At the end of March, the Board commenced a second administrative proceeding against MCorp alleging that it had violated § 23A of the Federal Reserve Act by causing two of its subsidiary banks to extend unsecured credit of approximately $63.7 million to an affiliate. For convenience, we shall refer to that proceeding as the “§ 23A proceeding” and to the earlier proceeding as the “source of strength proceeding.” In May 1989, MCorp initiated this litigation by filing a complaint in the Bankruptcy Court against the Board seeking a declaration that both administrative proceedings had been automatically stayed pursuant to the Bankruptcy Code; in the alternative, MCorp prayed for an injunction against the further prosecution of those proceedings without the prior approval of the Bankruptcy Court. On the Board’s motion, the District Court transferred that adversary proceeding to its own docket. In June 1989, the District Court ruled that it had jurisdiction to enjoin the Board from prosecuting both administrative proceedings against MCorp and entered a preliminary injunction halting those proceedings. The injunction restrained the Board from exercising “its authority over bank holding companies . . . to attempt to effect, directly or indirectly, a reorganization of the MCorp group [of companies] except through participation in the bankruptcy proceedings.” In re MCorp, 101 B. R. 483, 491. The Board appealed. Although the District Court did not differentiate between the two Board proceedings, the Court of Appeals held that the § 23A proceeding could go forward but that the source of strength proceeding should be enjoined. The court reasoned that the plain language of the judicial review provisions of the Financial Institutions Supervisory Act of 1966
