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Bank of Louisiana v. Federal Deposit Insurance Corp.

United States Court of Appeals, Fifth Circuit

March 28, 2019

BANK OF LOUISIANA; G. HARRISON SCOTT; SHARRY SCOTT; JOHNNY CROW, Plaintiffs - Appellants
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant-Appellee

          Appeal from the United States District Court for the Eastern District of Louisiana

          Before SMITH, DUNCAN, and ENGELHARDT, Circuit Judges.

          STUART KYLE DUNCAN, Circuit Judge.

         The Federal Deposit Insurance Corporation ("FDIC") brought two enforcement proceedings against the Bank of Louisiana and three of its directors (collectively, the "Bank") for violating federal banking laws. At the close of each proceeding, the FDIC Board ("Board") issued a final order penalizing the Bank. In turn, the Bank petitioned this court for review of both orders pursuant to 12 U.S.C. § 1818(h)(2), which vests "exclusive" jurisdiction to review final Board orders in the federal circuit courts. But the Bank also sued the FDIC in federal district court, alleging various constitutional violations arising out of the same enforcement proceedings. The sole issue on appeal is whether the district court correctly dismissed the Bank's lawsuit for lack of subject matter jurisdiction. It did. We therefore AFFIRM.

         I.

         A.

         Among its other responsibilities, the FDIC is authorized to investigate and institute proceedings against federally-insured banks and savings associations to prevent "unsafe or unsound practice[s]" and to enforce federal banking laws and regulations. See 12 U.S.C. §§ 1811, 1818(b); see also Fed. Deposit Ins. Corp. v. Bank of Coushatta, 930 F.2d 1122, 1124-26 (5th Cir. 1991) (discussing FDIC's "regulatory tools for dealing with troubled banks"). Exercising that authority, the FDIC may issue a notice of charges (12 U.S.C. § 1818(b)), hold hearings (id. § 1818(h))[1], issue cease-and-desist orders (id. § 1818(b), (c)), and levy monetary penalties (id. § 1818(i)).

         This enforcement scheme includes "a comprehensive system for judicial review." Rhoades v. Casey, 196 F.3d 592, 597 (5th Cir. 1999) (citing Bd. of Governors of Fed. Reserve Sys. of U.S. v. MCorp Fin., Inc., 502 U.S. 32, 37 (1991)). One may obtain judicial review of a final agency order "exclusively" by "filing in the [relevant] court of appeals of the United States … a written petition praying that the order of the agency be modified, terminated, or set aside." 12 U.S.C. § 1818(h)(1), (h)(2)[2]; see also Rhoades, 196 F.3d at 597 (explaining "a party may obtain review of [an] order issued by the banking agency by filing [a petition] in a Court of Appeals of the United States") (citing 12 U.S.C. § 1818(h)(2)); Groos Nat. Bank v. Comptroller of the Currency, 573 F.2d 889, 894 (5th Cir. 1978) (explaining "[j]udicial review of final agency cease and desist orders is placed in the United States Circuit Courts of Appeal by 12 U.S.C. § 1818(h)"). Only in specific circumstances may federal district courts exercise jurisdiction over banking agency orders. For instance, upon issuance of a temporary cease-and-desist order, a bank "may apply to [a] United States district court … for an injunction setting aside, limiting, or suspending the enforcement, operation, or effectiveness of such order" pending completion of administrative proceedings. 12 U.S.C. § 1818(c)(2). And the agency itself may apply to a federal district court to enforce its orders. See id. § 1818(i)(1). However, unless otherwise provided, "no court shall have jurisdiction to affect by injunction or otherwise the issuance or enforcement of any notice or order [under section 1818], or to review, modify, suspend, terminate, or set aside any such notice or order." Id.

         We have described these procedures in section 1818 as "a detailed framework for regulatory enforcement and for orderly review of the various stages of enforcement." Bd. of Governors of Fed. Reserve Sys. v. DLG Fin. Corp., 29 F.3d 993, 999 (5th Cir. 1994) (quoting Groos, 573 F.2d at 895). And we have emphasized that "[section] 1818(i) in particular"-the jurisdictional bar referenced above-"evinces a clear intention that this regulatory process is not to be disturbed by untimely judicial intervention[.]" Id.; see also Rhoades, 196 F.3d at 597 (noting "the Supreme Court [has] held that the plain, preclusive language of § 1818(i) 'provides us with clear and convincing evidence that Congress intended to deny the District Court jurisdiction to review and enjoin' administrative proceedings") (quoting MCorp, 502 U.S. at 44).

         B.

         The Bank is a New Orleans-based community bank founded in 1958 by G. Harrison Scott ("Scott") and his late partner, James Comiskey. Scott has been chairman of the Bank's Board of Directors since its founding and has served as the Bank's president since 2005. In October and November 2013, the FDIC brought two enforcement actions against the Bank, alleging violations of various banking laws and regulations. While those proceedings were pending at different stages, in August 2016 the Bank and three of its directors-Scott, Sharry Scott, and Johnny Grow-sued the FDIC in federal district court, alleging constitutional violations arising out of the enforcement actions. We recount the intertwined history of these actions in some detail.

         The first enforcement proceeding began on October 22, 2013. The FDIC alleged that the three directors had caused the Bank to violate federal regulations over a two-year period, specifically by approving illegal loans in violation of Regulation O, 12 C.F.R. § 215.4, which limits the credit a bank can extend to its executives, directors, and principal shareholders. The directors were also charged with permitting Bank insiders to overdraw their accounts while avoiding overdraft fees. See generally Scott v. FDIC, 684 Fed.Appx. 391 (5th Cir. 2017) (discussing charges against the Bank). Following briefing and an evidentiary hearing, the presiding administrative law judge ("ALJ") issued a decision on July 2, 2014, recommending a $10, 000 civil penalty for each director in addition to costs and fees. On November 18, 2014, the Board adopted the ALJ's recommendation in a final order. On December 22, 2014, the directors petitioned our court for review. After staying the case pending resolution of the second enforcement proceeding, we issued an opinion on April 4, 2017, denying the directors' petition. See id. at 397.

         The second enforcement proceeding began on November 1, 2013. The Bank was charged with operating in an unsafe and unsound manner and with violating provisions of the Bank Secrecy Act, [3] the Electronic Funds Transfer Act, [4] the Real Estate Settlement Procedures Act, [5] the Truth in Lending Act, [6]the Home Mortgage Disclosure Act, [7] and the National Flood Insurance Program.[8] The same ALJ from the first proceeding conducted a six-day trial and, on May 17, 2016, recommended that the FDIC impose a $500, 000 civil penalty and order the Bank to cease and desist its violations. The Board adopted the ALJ's recommendation and issued a final order on November 15, 2016. See Bank of La., FDIC-12-489b, FDIC-12-479k, 2016 WL 9050999 (Nov. 15, 2016). As relevant here, the Board concluded that the ALJ's "lengthy, detailed, and well-reasoned opinion" had "fully addressed" and properly rejected the Bank's arguments that the "FDIC's examiners were motivated by age discrimination against Scott," that the Bank was "denied due process" by certain ALJ rulings concerning document admissibility and witness sequestration, and that the ALJ was unconstitutionally appointed. Id. at *2, *11-13. On December 19, 2016, the Bank petitioned our court for review. We stayed proceedings pending the Supreme Court's decision in Lucia v. SEC, which subsequently held that Securities and Exchange Commission ALJs are "Officers of the United States" under the federal Constitution's Appointments Clause. See 138 S.Ct. 2044, 2049 (2018); U.S. Const. art. II, § 2, cl. 2. On September 5, 2018, we granted the FDIC's motion to remand the case to the agency in light of Lucia.

         While the second proceeding was pending before the Board (and while the first proceeding was pending on appeal before us), the Bank filed the instant lawsuit in federal district court on August 4, 2016, claiming the FDIC committed constitutional violations during the enforcement proceedings. Specifically, the Bank alleged the FDIC denied it equal protection by targeting Scott, the Bank's president, due to his age.[9] The Bank further alleged the ALJ violated due process by preventing it from proffering certain evidence and by preventing Scott from talking with his counsel at certain points during the proceedings. These were the same constitutional claims considered and rejected by the ALJ and the Board during the second enforcement proceeding. See Bank of La., 2016 WL 9050999 at *11-13.

         The Bank originally sought a permanent injunction to prevent the Board from issuing a final order in the second proceeding; a declaratory judgment that the FDIC violated its constitutional and statutory rights during both enforcement proceedings; damages; sanctions; and attorney's fees. After the Board issued its second order on November 15, 2016, the Bank abandoned its requests for injunctive relief and damages, leaving only its request for declaratory judgment.

         The FDIC moved to dismiss the Bank's lawsuit for lack of subject matter jurisdiction, asserting that the statutory review scheme in 12 U.S.C. § 1818 precludes district court jurisdiction. The district court granted the FDIC's motion and dismissed the Bank's lawsuit without prejudice, emphasizing that the Bank could assert its claims in this court on direct review of the agency's final order. The Bank appeals.

         II.

         We review a dismissal for lack of subject matter jurisdiction de novo, accepting all well-pleaded facts as true and viewing those facts in the light most favorable to the plaintiff. Griener v. United States, 900 F.3d 700, 703 (5th Cir. 2018). "As a court of limited jurisdiction, a federal court must affirmatively ascertain subject-matter jurisdiction before adjudicating a suit. A district court should dismiss where it appears certain that the plaintiff cannot prove a plausible set of facts that establish subject-matter jurisdiction." Venable v. La. Workers' Comp. Corp., 740 F.3d 937, 941 (5th Cir. 2014) (cleaned up). A court may find that plausible set of facts by considering "(1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Spotts v. United States, 613 F.3d 559, 565-66 (5th Cir. 2010) (citation omitted). The party asserting jurisdiction bears the burden of proof. Griener, 900 F.3d at 703.

         III.

         "Within constitutional bounds, Congress decides what cases the federal courts have jurisdiction to consider," including "when, and under what conditions, federal courts can hear them." Bowles v. Russell, 551 U.S. 205, 212- 13 (2007); see also, e.g., La. Real Estate Appraisers Bd. v. Fed. Trade Comm'n, 917 F.3d 389, 394 (5th Cir. 2019) (federal courts "cannot act without authority from Congress or the Constitution") (citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 378 (1994)). As a general matter, federal district courts have subject matter jurisdiction over all civil cases arising under the Constitution and federal law. U.S. Const. art. III, § 2; 28 U.S.C. §§ 1331, 2201. But sometimes Congress leapfrogs district courts by channeling claims through administrative review and directly to federal appellate courts. See Elgin v. Dep't of Treasury, 567 U.S. 1, 9 (2012) (explaining Congress may "channel[ ] judicial review of a constitutional claim" through "a statutory scheme of administrative review followed by judicial review in a federal appellate court[, ] [thereby] preclud[ing] district court jurisdiction") (citing Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 206 (1994)). In that event, federal district courts lack subject matter jurisdiction to hear those claims. See, e.g., Arbaugh v. Y&H Corp., 546 U.S. 500, 515 n.11 (2006) (explaining "Congress has exercised its prerogative to restrict the subject-matter jurisdiction of federal district courts based on a wide variety of factors"); Dresser v. Meba Med. & Benefits Plan, 628 F.3d 705, 708 (5th Cir. 2010) (district court properly dismissed lawsuit as "an attempt to circumvent the channeled path for judicial review" when review scheme required appeal from agency "to a federal circuit court"). The question in this case is whether Congress established such a scheme in 12 U.S.C. § 1818, which is the regulatory process deployed by the FDIC in its enforcement proceedings against the Bank. If it did, then the district court lacked subject matter jurisdiction over the Bank's separate lawsuit challenging the constitutionality of those proceedings.

         Congress may preclude district court jurisdiction either explicitly or implicitly. To discern an explicit preclusion, we examine whether "the text … expressly limit[s] the jurisdiction that other statutes confer on district courts," such as 28 U.S.C. § 1331. Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 489 (2010); see also, e.g., Elgin, 567 U.S. at 25 (Alito, J., dissenting) (explaining that, "[w]hen dealing with an express preclusion clause … we determine the scope of preclusion simply ...


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