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FDIC Enforcement Decisions and Orders |
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Board, rejecting recommendation of the ALJ, finds FDIC's action in the underlying action substantially justified and denies application for attorney fees under Equal Access to Justice Act. However, noting special circumstances, it awards the fees and expenses under its own discretionary authority because Applicant had resigned his positions with the Bank and had neither participated in the unsafe or unsound practices nor received any direct or indirect benefit from them.
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[.2] Equal Access to Justice Act Substantial Justification
[.3] Fees and Expenses Attorney Fees FDIC Discretionary Authority
In the Matter of
This proceeding arises out of an Application for Recovery of Attorney's Fees and Other Expenses dated March 1, 1991 ("Application"), by Dan S. Geiger ("Applicant") submitted to the Federal Deposit Insurance Corporation's ("FDIC") Office of the Executive Secretary ("OES") under the Equal Access to Justice Act ("EAJA"), 5 U.S.C. §504, and the FDIC's Rules of Practice and Procedures, 12 C.F.R. §§308.113-.127, seeking recovery of attorney fees and other expenses incurred in connection with a Notice of Charges and of Hearing issued August 10, 1990. The charges alleged that Applicant had engaged in unsafe or unsound banking practices by participating in certain bank fund transfers to law firms on behalf of certain officers of the bank, in anticipation of the insolvency and closure of First Pacific Bank, Beverly Hills, California ("Bank"). On October 15, 1990, the Enforcement Counsel moved to remove Applicant as a party after determining that he had no direct or indirect involvement in the transfers. By decision of February 5, 1991, the FDIC Board of Directors ("Board") accepted the Administrative Law Judge's Recommended Decision and ordered that Applicant be dismissed.
A. FDIC's Charges Against Applicant
On April 30, 1990, the FDIC examined the Bank's condition and found that it had
{{4-30-92 p.A-1830.1}}"an extremely high immediate or near term probability of failure due to the volume and severity of weaknesses or unsafe or unsound conditions." Declaration of Donald L. Pfeiffer, Assistant Regional Director at ¶7 ("Pfeiffer Decl."). It was found to be insolvent. Id. at ¶8. On July 12, 1990, a meeting was held between the Bank's board of directors and legal representatives of the Bank and regulators from the California State Banking Department and the FDIC, at the offices of the California State Banking Department in Los Angeles. The Bank was advised at this meeting and in a follow-up letter from the State Banking Department of its critical financial condition and that regulators were prepared to take "extreme action" unless the Bank promptly corrected its condition. Pfeiffer Decl. at ¶11.
B. The ALJ's Recommended Decision
After considering the testimony and documentary, evidence presented by Enforcement Counsel and the Applicant, the ALJ made the following findings:
C. FDIC's Exceptions
The FDIC filed exceptions to the ALJ's findings of fact and conclusions of law on grounds that: 1) the Application does not comply with the regulatory procedural requirements needed to establish Applicant's eligibility1for an EAJA award since he failed to serve a net worth statement on Enforcement Counsel; 2) the position taken by the FDIC in the underlying action against Applicant was substantially justified; and 3) special circumstances exist which would make an award of attorney fees and expenses unjust.
Based upon a thorough review of the testimony, the documentary evidence, the briefs and arguments of the parties and the ALJ's Recommended Decision, the Board concurs with the ALJ's finding that the Application should be considered and that the Applicant demonstrated eligibility to seek an award of attorney fees, but finds that the FDIC's position in the underlying action was substantially justified.
A. The Application
Enforcement Counsel maintains that since the Application served on the regional office did not contain a copy of the Applicant's net worth statement, the filing was therefore defective and the Application should be summarily dismissed. Answer at 10. The requirement that an applicant under the EAJA submit an application within thirty days of final judgment is "a mandatory, jurisdictional condition." Monark Boat Co. v. NLRB, 708 F.2d 1322, 1327 (8th Cir. 1983). Additionally, an application that is incomplete or does not demonstrate the requirements that is incomplete or does not demonstrate the requirements of eligibility under the EAJA is barred from being considered for an award. See Olson v. Norman, 830 F.2d 811, 821 (8th Cir. 1987) (application did not specifically allege that United States was not substantially justified); Naporano Iron and Mutual Co. v. United States, 825 F.2d 403, 404 (Fed. Cir. 1987) (application lacked contemporaneous records of attorney fees and expenses); United States v. Hopkins Dodge Sales, Inc., 707 F. Supp. 1078, 1081 (D. Minn. 1989) (holding that the applicant's showing of eligibility is not merely a notice requirement but is jurisdictional and must be filed within thirty days); but see Dunn v. United States, 775 F.2d 99, 104 (3rd Cir. 1985) (defects in an EAJA application are not jurisdictional so long as the application is filed within 30 days and where permitting supplementation will not prejudice the government).
[.1] In this matter, the Application filed with the OES complied with the EAJA eligibility requirements. However, the FDIC's regulations state that the application shall be
B. Substantial Justification
The Applicant has alleged that the FDIC was "premature" in naming him in the FDIC's Order and Notice on August 10, 1990, and therefore, the action was not substantially justified. Application at 2. The EAJA permits an award for fees and expenses to an applicant unless the position of the agency is substantially justified or special circumstances make an award unjust. 5 U.S.C. §504(a)(1); see also 12 C.F.R. §308.118. Under the EAJA, the FDIC bears the burden of showing that its position was substantially justified. See Kemp v. Bowen, 822 F.2d 966, 967 (10th Cir. 1987). To do so, the FDIC must prove that its case had a reasonable basis in law and in fact. Id.
[.2] A temporary cease-and-desist order is an emergency measure used by the FDIC, in this case, to attempt to stop the wrongful dissipation of assets of a financial institution. See 12 U.S.C. §1818(c). The FDIC first discovered on August 6 that the allegedly improper payments were taking place, with the first one occurring on July 13 and the last on August 7, totally $180,000. To prevent further dissipation, the FDIC issued the Order on August 10, the same day the Bank failed. Thus, the FDIC's San Francisco Regional Office ("Regional Office") had three to four days to gather data on a
[.3] The Board holds that the eligibility and filing requirements of the EAJA and the FDIC's implementing regulations are jurisdictional and failure to file a complete ap-
{{4-30-92 p.A-1830.6}}plication within thirty days acts as a bar to any recovery. The service requirements under the FDIC's implementing regulations may, however, be cured absent any prejudice to the FDIC. The Board finds no prejudice in this case and, therefore, concludes that the Applicant has demonstrated eligibility to seek an award under the EAJA. Additionally, for the reasons set forth herein, the Board finds that the FDIC was substantially justified in initiating the underlying proceeding against Applicant, based on the best information and belief available to it at the time. Therefore, Applicant is not entitled to an award of attorney fees under the EAJA. However, the Board has determined that the unique factual circumstances involved here, in particular the fact that the Applicant had resigned from the Bank, or was otherwise not present at the time the transfers occurred and received no benefit from the payments, justify the exercise of the Board's discretion to pay the Applicant his fees and expenses. Nevertheless, the Board would expect that in the future, any director or officer named in a notice of charges for alleged violations that occurred subsequent to his resignation from the institution, or who claims other defenses such as lack of involvement in the alleged violation, would immediately contact the FDIC's regional counsel with such information and provide substantiation in order to prevent the incurrence of legal fees. The Board will not condone the incurrence of unnecessary legal expenses in the future.
The Board of Directors of the Federal Deposit Insurance Corporation, having considered the entire record in this proceeding, hereby finds that the FDIC was substantially justified, as that term is interpreted with respect to the Equal Access to Justice Act, in naming Applicant in the Temporary Order to Cease and Desist and Notice of Charges and of Hearing issued on August 10, 1990. However, the Board has determined that the unique factual circumstances involved here, in particular the fact that the Applicant had resigned from the Bank, or was otherwise not present at the time the transfers occurred, justify the exercise of the Board's discretion to pay the Applicant his fees and expenses.
/s/ Hoyle L. Robinson
In the Matter of
Steven M. Charno, Administrative Law
On March 4, 1991, Dan S. Geiger ("Applicant") filed an Application for Recovery of Attorney's Fees and Other expenses ("Application") in the amount, as amended, of $4,041.85 from the Federal Deposit Insurance Corporation ("FDIC") pursuant to the Equal Access to Justice Act, 5 U.S.C. §504, and the FDIC's Rules of Practice and Procedures, 12 C.F.R. §§308.113 et seq. On March 25, 1991, the FDIC filed an Answer objecting to the Application on the following grounds: (1) Applicant did not meet the eligibility requirements of 12 C.F.R. §§308.116 and 308.121 because he failed to file a net worth statement with the Applications,1(2) Applicant did not identify an
The FDIC was informed during April of 1990 that Applicant was a senior vice president of First Pacific Bank of Beverly Hills, California ("Bank") and thereafter made no attempt to ascertain whether he continued to be employed by the Bank.8It is uncontested that (1) Applicant resigned his Loan Committee membership at the Bank on May 31, 1990, (2) Applicant was on vacation and not present at the Bank between June 22 and July 31, 1990 and (3) Applicant resigned as an officer and employee of the Bank as of July 31, 1990.9At a July 11, 1990 meeting, the Bank's Board of Directors was allegedly informed for the first time that the FDIC found the Bank to be insolvent. At a meeting the following day, members of the Bank's Board of Directors were allegedly informed by the California State Banking Department ("State") of regulatory findings of insolvency and imminent closure. Applicant was not present at either of these meetings,10and the record contains no evidence that the FDIC (1) ever possessed any evidence that Applicant was made aware of either regulatory finding prior to the issuance of the Notice of Charges and of Hearing ("Notice") in the underlying proceeding11or (2) had an adequate factual basis for inferring such an awareness.
1. The Application is in compliance with the jurisdiction requirements of 5 U.S.C. §504 and 12 C.F.R. §§308.113 et seq., and Application has demonstrated eligibility to seek an award of attorney's fees and expenses pursuant thereto.
The Federal Deposit Insurance Corporation shall reimburse Dan S. Geiger for attorney's fees and expenses in the amount of $4,041.85.
/s/ Steven M. Charno |
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Last Updated 6/6/2003 | legal@fdic.gov |