The U.S. Court of Appeals for the Fifth Circuit recently affirmed the district court’s judgment dismissing a Louisiana bank’s lawsuit alleging constitutional violations during administrative enforcement proceedings brought by the FDIC for lack of subject matter jurisdiction.
The FDIC initially brought two enforcement proceedings against the bank for violating federal banking laws and regulations. In the first proceeding, the FDIC alleged that three directors of the bank violated federal regulations by approving illegal loans in violation of Regulation O, which limits the credit a bank can extend to its executives, directors, and principal shareholders. The presiding administrative law judge issued a decision recommending a $10,000 civil penalty for each director in addition to costs and fees. In the second proceeding, the FDIC charged the bank with violating provisions of RESPA, TILA, and HMDA, among other federal laws, which resulted in a recommendation of a $500,000 civil penalty by the same administrative law judge. During the proceedings, however, the bank also raised arguments that the FDIC examiners were motivated by age discrimination against the bank’s founder and that the bank was denied due process by certain rulings concerning document admissibility and witness sequestration, among other claims. Nonetheless, the FDIC Board adopted both recommendations in final orders, finding that the administrative law judge’s opinions had fully addressed and properly rejected the bank’s arguments.
The bank sued in district court alleging the same constitutional violations arising out of the proceedings. The district court granted the FDIC’s motion to dismiss the case for lack of subject matter jurisdiction, and the bank petitioned the Fifth Circuit to review the final orders.
On appeal, the Fifth Circuit examined the statutory review scheme under 12 U.S.C. § 1818, which prescribes a detailed framework for regulatory enforcement proceedings and vests exclusive jurisdiction to review final FDIC orders in the federal circuit courts, subject to certain circumstances. Under the implicit preclusion analysis, the panel first found that the plain and preclusive language of 12 U.S.C. § 1818 provides clear and convincing evidence that Congress intended to deny the district court jurisdiction to review and enjoin administrative proceedings as an explicit jurisdictional bar. However, the bank also argued that the regulatory scheme failed to provide meaningful judicial review of its claims since the enforcement proceedings did not afford the bank adequate opportunity to uncover the remainder of the evidence of its age discrimination and due process claims. So the panel next considered the three factors prescribed by the Supreme Court, in Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (1994), to determine whether the claims at issue were of the type Congress intended to be reviewed within the statutory structure. The panel found that Congress provided meaningful judicial review by authorizing review of challenges to a final agency order by a federal circuit court. In fact, the panel found that the bank raised its constitutional claims during the enforcement proceedings where both the administrative law judge and the FDIC Board addressed them. In addition, the panel found that the relevant statute expressly incorporates the procedural and evidentiary features typical of administrative proceedings which equips the FDIC to perform fact-finding of such claims. In considering the other Thunder Basin factors, the panel also held that the bank’s constitutional claims were substantively intertwined with the merits of the dispute in connection with the enforcement proceedings, rather than collateral to the administrative scheme as the bank argued, and that the bank’s claims did not fall outside of the agency’s expertise. Thus, the panel held that the three Thunder Basin factors reinforced the conclusion that the statutory review scheme precluded district court jurisdiction over the bank’s claims.