The opinion of the court was delivered by: GREENE
This case involves the authority of the Federal Deposit Insurance Corporation (FDIC) (1) to prohibit a bank officer, who may have participated in the making of imprudent loans, from working for any federally insured bank in the United States without prior permission from the FDIC, and (2) to take such action at the initiation of administrative procedures designed to determine the bank officer's culpability rather than at their conclusion.
In March of 1985, the FDIC, which is responsible for monitoring federally insured banks, and empowered to detect, prevent, and remedy violations of federal banking laws and unsafe banking practices,
commenced an examination of the Bank. The examination revealed a number of loans of allegedly "inferior quality," and according to the FDIC examiners, a check of the bank records revealed that plaintiff was associated in various degrees with the major portion of these problem loans.
Following this examination of Bank, the FDIC served a notice on plaintiff on August 5, 1985, advising him that, pursuant to 12 U.S.C. § 1818(e)(1) and (2), it was initiating administrative procedures to remove him from office at and to prohibit him from any future participation in any other federally insured bank. Further, under 12 U.S.C. § 1818(e)(4),
the FDIC issued an interim suspension order removing plaintiff from office and prohibiting him from further banking participation forthwith pending resolution of the administrative removal proceedings.
Plaintiff thereupon brought this action, petitioning the Court to set aside or stay the FDIC's interim suspension order, in accordance with 12 U.S.C. § 1818(f) -- a specific provision granting authority to the courts to stay FDIC interim suspension orders.
After a hearing and consideration of the papers submitted by the parties, the Court, on August 22, 1985, 617 F. Supp. 509, granted plaintiff's motion for a temporary stay and remanded the interim suspension order to the FDIC for reconsideration in light of the Court's Memorandum Order. Specifically, the Court prohibited the FDIC temporarily from acting against plaintiff under the broad terms of the August 5 suspension order, without prejudice, however, to the agency's issuance of new interim suspension orders on a bank-by-bank basis based upon an agency determination that the order was necessary to protect the particular bank. The Court noted in its Memorandum that a remand was necessary because the FDIC order did not contain a reasoned explanation of the factors justifying plaintiff's suspension from participation in the affairs of any federally insured bank, and that this precluded the Court from conducting a meaningful review of the agency decision. The Memorandum further explained that the suspension order also failed to provide any explanation as to the reasons for the drastic measure of an immediate suspension order as distinguished from some other, lesser measure, such as a cease-and-desist order under section 1818(c)(1)
or an order under section 1818(e)(1) or (e)(2) (which would have effected plaintiff's removal following the completion of the administrative proceedings).
The apparent lack of criteria to guide the agency's discretion in choosing between emergency suspension orders issued at the initiation of administrative proceedings, and ordinary orders issued following the administrative process, led the Court to suggest that the FDIC promulgate some standards to guide agency officials in that regard, and incidentally thereby also to provide the courts with an adequate basis for review.
Upon remand, the FDIC reconsidered and rescinded the August 5 order, replacing it on September 9, 1985 with an Amended Order of Suspension.
The Amended Order contains two basic provisions: (1) it prohibits plaintiff from further participation in the affairs of both the and the banks pending the outcome of the administrative proceedings; and (2) it requires plaintiff to secure prior written approval before serving or acting as a director, officer, or employee of any federally insured bank or voting for a director of any such bank.
On September 16, 1985, plaintiff petitioned the Court for a stay of the Amended Order, challenging it on the same grounds as asserted against the original order, as failing to provide an adequate legal and factual rationale for the blanket prohibition and, more broadly, as exceeding the agency's statutory authority.
The FDIC opposed plaintiff's request for the stay, claiming that it had reconsidered plaintiff's suspension in accordance with the Court's Memorandum Order and had issued a narrower suspension order justified under the circumstances. The FDIC further claimed full authority under the statutory scheme to issue broad, industry-wide orders.