The FDIC's reliance on this principle is flawed in the present context. As the quotation from Mandel Brothers makes clear, agency power is limited to the exercise of "allowable discretion." Suspending an individual from all banks in a blanket order goes plainly beyond the "allowable discretion" granted to the FDIC to act on a bank-by-bank basis by sections 1818(e)(1) and (e)(2).
Congress purposefully limited the use of suspension and removal power to certain types of circumstances, well aware of the dangers of granting unfettered discretion to the FDIC to wield such potentially devastating power. It did not grant to the FDIC unlimited suspension powers; to the contrary, it carefully limited the exercise of the agency's authority. In such circumstances, reliance upon general principles and powers will not do.
See Fox v. Reich & Tang, Inc., 692 F.2d 250, 255 (2d Cir. 1982); see also, Zenith Radio Corp. v. Matsushita Electric Industrial Co., 505 F. Supp. 1190, 1255 (E.D. Pa. 1980). In light of the specific provisions in the statute that narrowly govern the FDIC's use of suspension power, Congress cannot possibly have intended that the FDIC also be empowered to exercise a broad blanket suspension power derived from only the agency's general enforcement powers without any limitation on its use.
As the FDIC recognizes, the principle of wide FDIC discretion in fashioning relief applies only "once the regulatory agency has found a violation or unsafe practice." Here, the agency has made no such finding: it is barring plaintiff from all banks at the very outset of the administrative process. The statute itself, of course, makes a distinction between what the agency is empowered to do on an emergency interim basis and what it is empowered to do following an administrative proceeding to ascertain the facts and merits of an alleged impropriety.
At a minimum, the agency may not issue a blanket, nationwide order where only interim conclusions have been reached, especially given the serious hardship of a suspension from office upon an individual and the length of time an interim suspension is likely to be in effect.
Finally, the FDIC attempts to justify its amended order on the basis that it needs the power to suspend individuals on a blanket basis if it is to fulfill its responsibility to protect insured banks. 12 U.S.C. § 1818(j) does empower the FDIC to do just that -- to issue a suspension order identical to the one handed down here, but only after there has been a determination of misconduct on the merits and a final order has been issued. Additionally, Congress has granted to the FDIC in section 1818(e)(1) and (e)(2) the power to suspend dangerous individuals from an unlimited number of banks -- it simply requires that the suspension be on a bank-by-bank, individualized basis.
The Court finds that the portion of the FDIC's amended order requiring plaintiff to obtain prior written approval before voting for a director, or serving or acting as a director, officer or employee of any bank, exceeds the agency's statutory authority
and is void.
The FDIC clearly had the power to suspend plaintiff from the Bank pursuant to subsection (e)(1) and from the Bank under subsection (e)(2). Accordingly, the Court's review of the order pursuant to 12 U.S.C. § 1818(j) with respect to these banks consists only of an analysis of the appropriateness of issuing a section 1818(e)(4) interim suspension order.
Section 1818(e)(4) permits the FDIC immediately to suspend or remove individuals subject to subsequent administrative removal proceedings under section 1818(e)(1) and (e)(2), during the pendency of the administrative proceedings and prior to a decision on the merits of the removal.
The only guidance the statute offers for the appropriate invocation of the interim suspension provision is that it may be issued "if [the appropriate federal banking agency] deems it necessary for the protection of the bank or the interests of its depositors." 12 U.S.C. § 1818(e)(4).
The Amended Order prohibits plaintiff from further participation in any manner in the conduct of the affairs of and banks, suspending him effective immediately from office as a director, officer, or participant in the conduct of the affairs of the bank, pending completion of the administrative removal hearings.
These suspensions are based upon an examination of Bank conducted in March and April of 1985. According to the FDIC's Amended Notice of Intention to Remove from Office, plaintiff was responsible for three unsafe and unsound banking practices with respect to several loan transactions made by Bank. Plaintiff vigorously denies his involvement in the loans, and argues that the FDIC's affidavits are insufficient to support the allegations.
The (e)(4) provisions (in combination with the (e)(1) and (e)(2) provisions) establish a stringent set of requirements which must be satisfied before the agency may take the extreme measure of suspending or removing an officer or director of an insured bank on an interim basis pending administrative proceedings. Indeed, the Court issued its August 22 stay, at least in part, because of the FDIC's failure to provide any basis for determining how and on what basis it had exercised its discretion in issuing the (e)(4) order
or on what basis it would do so in any other case.
The Amended Order does not significantly fill that vacuum. The statement of reasons for the suspension accompanying the Amended Order is substantially identical to the statement of reasons accompanying the first order.
The only other new material offered in support of the Amended Order consisted of an affidavit submitted by a FDIC official and an "opinion," in which the FDIC attempts to rebut claims made by plaintiff regarding his role in two other banks, and . Neither the affidavit nor the opinion nor any other material submitted by the FDIC explains why the alleged misconduct at even if it did occur, warrants interim suspension.
Section 1818(e)(4) requires more than a simple finding that unsafe or unsound practices have occurred; in addition, the interim suspension must be "necessary for the protection of the bank and its depositors." The furthest extent the FDIC had gone to establish that factor is a simple repetition of the statutory language to the effect that the FDIC "has deemed it necessary for the protection of Bank and Bank and the interests of their depositors that responded be suspended from office . . ." Amended Order at 2. Even after a request from the Court for more detailed reasons for the agency action, the FDIC still fails adequately to explain why, on the facts of this case, plaintiff's alleged misconduct at seriously threatens the safety of and banks pending the completion of the administrative proceedings.
Even accepting the FDIC version of the facts, plaintiff was involved in two or three troubled loans, and then only in a tangential way.
There is no allegation of dishonesty, habitually disastrous banking practices, or any other type of misconduct that might indicate that plaintiff will constitute a serious threat to those two banks pending resolution of the administrative action. The FDIC delayed until August 1985 to institute the removal proceedings even though it had discovered problem loans in March of this year. This delay casts serious doubt on the agency claim that now, when the FDIC has finally bestirred itself, plaintiff's immediate removal is necessary for the protection of those banks (especially since plaintiff has not even participated in the affairs of since his resignation from that bank's Board of Directors in July 1985).
Thus, even assuming that the FDIC has established a colorable claim that plaintiff was involved in some of the problem loans at the Court finds that the practices at issue here do not rise to the standard imposed in subsection (e)(4) for an interim suspension action.
In addition to finding that the FDIC has not satisfied the requirements of (e)(4) in issuing the interim amended order, the Court finds that the plaintiff likewise prevails on the other prerequisites for preliminary relief.
The severe and permanent potential injury to plaintiff's business reputation as a result of a 9 to 12 month interim suspension,
together with economic hardship caused by the destruction of plaintiff's banking career, clearly constitute irreparable injury. In contrast, it would be disingenuous for the FDIC to claim severe or immediate injury to the public if plaintiff is allowed to remain in office, given their own delay from March to August in instituting any action against plaintiff.
For the reasons stated herein, the Court will grant the plaintiff's motion for a preliminary injunction.