Board of Governors of the Federal Reserve System v. MCorp Financial, Inc.

Under the Financial Institutions Supervisory Act of 1966, the Board of Governors of the Federal Reserve System (the board) (defendant) could institute administrative proceedings against financial institutions and issue cease-and-desist orders. MCorp Financial, Incorporated (MCorp) (plaintiff) was a bank holding company. In 1988, the board instituted an administrative proceeding against MCorp pursuant to the board’s source-of-strength regulation. In 1989, the board instituted a second administrative proceeding against MCorp pursuant to § 23A of the Federal Reserve Act. Subsequently, MCorp filed voluntary bankruptcy petitions. Next, MCorp sued the board in the district court, arguing that the court ought to enjoin the two ongoing administrative proceedings because the filing of the bankruptcy petitions triggered an automatic stay as provided by the Bankruptcy Code. By this point, the board had issued only notices of charges and of hearing with respect to the two administrative proceedings and had not entered any orders or made any final decisions. Regardless, the district court entered a preliminary injunction enjoining the two proceedings. The board appealed to the court of appeals. The court of appeals held that the § 23A proceeding could go forward and that the source-of-strength proceeding must be enjoined because it exceeded the board’s statutory authority. The board appealed to the United States Supreme Court.