Banking and Finance Law Daily Bank’s outside attorney can’t sue OCC for retaliatory administration enforcement
Wednesday, January 29, 2020

Bank’s outside attorney can’t sue OCC for retaliatory administration enforcement

By Richard A. Roth, J.D.

An attorney hired by a bank to investigate claims that loan losses were fraudulently concealed could not sue the OCC for subsequent administrative enforcement proceedings that he claimed violated his First Amendment rights.

The First Amendment does not imply a cause of action against the Office of the Comptroller of the Currency or its officials who allegedly brought administrative enforcement actions against an attorney in retaliation for his criticism of the agency during and after an investigation into his bank client, according to the U.S. Court of Appeals for the District of Columbia Circuit. The circumstances under which Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S.388 (1971), allows suits against law enforcement officers for Fourth Amendment violations cannot be expanded to First Amendment suits against bank regulators, the court said (Loumiet v. U.S., Jan. 28, 2020, Katsas, G.).

Attorney’s representation. According to the opinion, longer than 20 years ago, the attorney was hired by a bank to investigate claims that the bank and three executives had fraudulently concealed more than $20 million in loan losses. The attorney produced two reports that the bank shared with the OCC, both of which essentially concluded there had been no fraud.

Regardless of the reports, the OCC placed the bank into receivership, and the three executives later were indicted. Two of the officers pled guilty, and the third was convicted after a trial.

The attorney, however, was unhappy with the OCC’s conduct of the investigation. He raised complaints with the Treasury Secretary, Comptroller of the Currency, and the Inspector General. He also represented the bank in a civil rights suit against the OCC, which the bank eventually withdrew.

Enforcement proceedings. After the criminal prosecutions, the OCC filed an administrative proceeding against the attorney, his law firm, and one of his partners. According to the agency, the attorney, firm, and partner were institution-affiliated parties who breached a fiduciary duty to the bank in a way that caused, or threatened to cause, more than a minimal loss to the bank. The attorney’s partner and the firm chose to settle the charges, but the attorney chose to fight. An administrative law judge recommended that the charges be dismissed because the attorney had not breached a fiduciary duty. The OCC eventually dismissed the proceeding, saying the attorney had not caused the bank any loss.

Unsatisfied, the attorney demanded the OCC pay his attorney fees, citing the Equal Access to Justice Act. Eventually, he was awarded $675,000 in fees because the absence of any evidence that his actions harmed the bank meant the OCC’s enforcement position had not been substantially justified.

Civil rights suit. Still unsatisfied, the attorney sued the OCC and four agency officials, raising claims that included retaliatory enforcement proceedings that violated his freedom of speech rights under the First Amendment. The suit was dismissed by the district court judge, but the dismissal was reversed by the D.C. Circuit. After the reversal, the judge declined to dismiss the suit, and the agency and official appealed.

By this time, only the First Amendment-related claim remained.

Civil rights suits. Bivens decided that the Fourth Amendment implied a cause of action for a violation of the constitutional protection against unreasonable searches and seizures, the D.C. Circuit’s analysis began. However, the Supreme Court has for some years warned against expanding that decision’s reach. In fact, the Court has not recognized any new causes of action in 40 years, the D.C. Circuit pointed out.

Today, there is a two-part test to decide whether the Constitution implies a right of action, the opinion said, citing Ziglar v. Abbasi, 137 S. Ct. 1843 (2017): whether the plaintiff is trying to expand Bivens into a "new context," and whether there are "special factors counseling hesitation." The attorney’s claims failed both tests, the circuit court decided.

New context. A number of factors made clear that the attorney was trying to expand Bivens into a new context, the opinion said: the attorney asserted a violation of the First Amendment, rather than the Fourth Amendment cited in Bivens; the OCC was acting under the Financial Institutions Reform, Recovery, and Enforcement Act, while the law enforcement officers in Bivens were enforcing federal drug laws; and the suit sought damages from OCC officials, which was a new category of defendants—suits had previously been recognized against narcotics enforcement agents, prison officials, and a former member of Congress, but not bank regulators.

Special factors. In addition, FIRREA’s administrative enforcement procedures was a special factor that counseled hesitation in expanding Bivens, the opinion said. FIRREA restricted what conduct could be penalized and included due process safeguards. OCC officials had no influence on the ALJ’s recommendation process, and the agency’s ultimate decision could be reviewed by an appellate court.

Procedural protections were not remedies, the court conceded. However, they did "help constrain the unconstitutional exercise of government power."

Moreover, the opinion continued, the EAJA, which must be considered as part of the FIRREA process, "gives regulated parties a sword as well as a shield"—a sword the attorney had used effectively.

The case is No. 18-5020.

Attorneys: Carlos Loumiet, pro se. Tyce R. Walters, U.S. Department of Justice, for Michael Rardin.

Companies: Hamilton Bank

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