Recently, the U.S. District Court for the District of Columbia received a
complaint from an individual plaintiff suing the FDIC, its heads, board members and an administrative law judge (ALJ) for allegedly subjecting the plaintiff to an “endless and unlawful administrative process.” The lawsuit comes in the backdrop of a prior FDIC
enforcement action in which plaintiff was named as a respondent and listed as an institution-affiliated party, despite the plaintiff claiming he was not a “director, shareholder, member, or employee” of the bank. Under this action, the FDIC required the plaintiff to pay $74,000 as part of a larger assessment of civil money penalties.
As covered previously by InfoBytes, the U.S. Supreme Court held in SEC v. Jarkesy that if an executive agency issues an enforcement action in-house (and not through a court) and involves civil money penalties, then the defendants would be entitled to a jury trial, and the case’s venue must be in a federal Article III court.
The plaintiff argued in this case that the FDIC’s enforcement action was unconstitutional because of the following: (i) the FDIC’s board is unconstitutional since the President cannot remove a majority of its board members except for good cause, violating the ruling in Seila Law LLC v. CFPB (covered by an Orrick Insight here); (ii) the FDIC’s ALJs are unconstitutionally shielded from removal due to their “double for-cause” removal protections; and (iii) the enforcement proceeding violated the Seventh Amendment by depriving the plaintiff of his right to a jury trial and his due process rights. Among other relief, the plaintiff prayed the court enjoin the FDIC from continuing proceedings against him.
