Bank of Louisiana v. Federal Deposit Insurance Corp.

         SECTION "F"

          ORDER AND REASONS

          MARTIN L. C. FELDMAN UNITED STATES DISTRICT JUDGE.

         Before the Court is the defendant's motion to dismiss pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction. For the following reasons, the motion is GRANTED.

         Background

         This motion to dismiss arises out of the Federal Deposit Insurance Corporation's investigation and charges against the Bank of Louisiana for violations of agency regulations. In response to the FDIC's enforcement proceedings against the Bank, the Bank and others filed suit in this Court alleging constitutional violations against the Bank through the FDIC's practices.

         The Bank of Louisiana is a small, community bank founded in New Orleans in 1958 by former President G. Harrison Scott, James Comiskey, and Dr. Nicholas Chetta. The Bank provides banking services to a small, local, and well-known customer base.

         On October 22, 2013, the FDIC filed charges against Sharry Scott, G. Harrison Scott, and Johnny Crow (the directors) for violation of Regulation O. The FDIC alleged that the directors illegally approved a loan to a director as well as a loan to an executive officer. The Regulation O proceeding sought an award of civil penalties of $10, 000 from each of the three directors, as well as court costs and attorneys' fees of more than $200, 000. The notice of charge alleged that between October 2009 and November 2011, the directors caused the bank to engage in federal violations by providing favorable treatment to bank insiders by making improper loans and allowing the insiders to overdraw their accounts on multiple occasions without collecting overdraft fees. On July 2, 2014, the administrative law judge^[1] issued a 29-page recommended decision after full briefing and conducting an evidentiary hearing. The ALJ recommended that each of the three named directors pay a civil penalty of $10, 000. The plaintiffs waited 90 days to file exceptions to the recommendation. Although the FDIC's Uniform Rules of Practice and Procedure require that a party file exceptions to a recommended decision within 30 days, the FDIC Board considered and addressed in its decision the untimely exceptions. On December 22, 2014, the plaintiffs filed a petition for review of the FDIC Board's final decision with the United States Court of Appeals for the Fifth Circuit. On September 16, 2015, the plaintiffs filed an unopposed motion to stay the appeal pending the resolution of the FDIC's second enforcement proceeding against the bank; the Fifth Circuit entered an order staying the proceeding until the conclusion of the enforcement action against the bank.^[2]

         On November 1, 2013, ^[3] the FDIC filed three separate cease-and-desist charges against the bank. The cease and desist proceeding sought three cease-and-desist orders and an award of civil penalties in the amount of $540, 000. The notice of charges alleged that the bank was operating in an unsafe and unsound manner based on inadequate management, deficient asset quality, deficient earnings, various violations of law, and compliance violations with respect to the Bank Secrecy Act, The Electronic Funds Transfer Act, the Real Estate Settlement Practices Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, and the National Flood Insurance Program. This notice sought an order requiring the bank to cease and desist from these practices and to pay a civil penalty in the amount of $500, 000 for Bank Secrecy Act violations. The ALJ conducted a six-day trial in March 2015; the parties introduced evidence, cross-examined witnesses, and filed post-hearing and reply briefs. On May 17, 2016, the ALJ issued a decision, recommending a $500, 000 civil penalty; the bank filed exceptions to the recommended decision with the FDIC Board. The Board's final order affirms the ALJ's recommendation and imposes a $500, 000 civil penalty against the bank for Bank Secrecy Act violations and an order to cease and desist for various statutory and regulatory violations. The plaintiffs have now filed a timely appeal of that decision with the Fifth Circuit, with no decision yet.

         The plaintiffs filed suit in this Court. The plaintiffs' amended complaint asserts four causes of action: (1) a permanent injunction to stop the FDIC Board from issuing a final decision in the then-pending enforcement proceeding; (2) a request for declaratory judgment that the FDIC violated various statutes and constitutional provisions in conducting both enforcement proceedings; (3) damages; and (4) sanctions.^[4] In support of the constitutional violations, the plaintiffs allege that the bank and the directors were subject to age discrimination, retaliation, ridicule, and mockery, and were denied procedural due process rights guaranteed under the United States Constitution. Specifically, the plaintiffs allege that an assistant FDIC director embarked on a vendetta campaign to unseat the bank's president. The mission of the alleged vendetta, according to the plaintiffs, was to remove the chairman and president of the bank, G. Harrison Scott, because he was too old. The plaintiffs also allege that the ALJ unconstitutionally kept Scott from conferring with counsel during an overnight recess at the cease and desist hearing, in violation of the bank's constitutional rights to counsel and to free speech, and was wrongfully denied the right to make a proffer of evidence. The plaintiffs assert that this Court has jurisdiction for the age discrimination and constitutional violations because without this Court's intervention, these claims will escape a meaningful judicial review.

         The defendant moves the Court to dismiss this case for lack of subject matter jurisdiction. In response, the plaintiffs contend that 12 U.S.C. § 1818(h) and Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477 (2010) allow this Court to exercise subject matter jurisdiction for these allegedly “wholly collateral” constitutional claims. The Court now determines whether Congress has foreclosed its jurisdiction to hear these constitutional claims.

         I.

         Motions filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure allow a party to challenge the Court's subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). "As a court of limited jurisdiction, a federal court must affirmatively ascertain subject-matter jurisdiction before adjudicating a suit. The 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. Louisiana Workers' Compensation Corp., 740 F.3d 937, 941 (5th Cir. 2014)(citations and internal quotations omitted).

         Contrary to a 12(b)(6) motion, the Court may find a plausible set of facts to support subject matter jurisdiction by considering any of the following: “(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 burden of proof for a Rule 12(b)(1) motion is on the party asserting jurisdiction." Alfonso v. United States, 752 F.3d 622, 625 (5th Cir. 2014)(quoting In re FEMA Trailer Formaldehyde Prods. Liab. Litig., 646 F.3d 185, 189 (5th Cir. 2011)(internal citation and quotation marks omitted)).

         The 12(b)(1) standard is similar to that applicable to motions to dismiss under Rule 12(b)(6). See Williams v. Wynne, 533 F.3d 360, 364-65 n.2 (5th Cir. 2008)(observing that the Rule 12(b)(1) and Rule 12(b)(6) standards are similar, but noting that applying the Rule 12(b)(1) standard permits the Court to consider a broader range of materials in resolving the motion). "'[T]he central issue [in deciding a motion to dismiss] is whether, in the light most favorable to the plaintiff, the complaint states a valid claim for relief.'" Gentilello v. Rege, 627 F.3d 540, 544 (5th Cir. 2010)(citation omitted).

         II.

         A. Federal District Courts' ...