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FDIC Enforcement Decisions and Orders

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   [5155A] In the Matter of James C. Amberg, Robert Ray Carroll, Roscoe P. Steen, W. M. Causey, Billy Ray Whitehead, and Benny Zeagler, Docket No. FDIC-89-144k(10-2-90).

   Board rejects respondents' motion for reconsideration and stay pending appeal.

   [.1] Practice and Procedure — Reconsideration — Burden of Persuasion
   Petitioner bears burden of persuading the Board to reconsider its decision, specifying reasons and setting forth relevant new information that, for good cause, was not previously set forth.

   [.2] Practice and Procedure — Civil Money Penalty — Request for Hearing
   The FDIC has authority to prescribe procedures adapted to its particular regulatory mission and may require an answer as well as a request for hearing. Filing of a request for hearing does not eliminate the need to file an answer.

   [.3] Practice and Procedure — Application of Federal Rules of Civil Procedure
   The board may look to the Federal Rules of Civil Procedure for guidance, but where the Federal Rules are inconsistent with the FDIC's Rules of Practice and Procedure FDIC must follow its own regulations.

   [.4] Practice and Procedure — Motion for Stay Pending Appeal
   Petitioner bears burden of demonstrating that his case warrants issuance of stay by establishing likelihood of success on the merits, irreparable injury, no substantial harm to other interested persons, and no harm to the public interest.

In the Matter of
, and BENNY
, individually and as
directors of
(Insured State Nonmember Bank)


   On June 26, 1990, the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") entered a Decision and Order ("Order") against James C. Amberg, Robert Ray Carroll, Roscoe P. Steen, W.M. Causey, Billy Ray Whitehead, and Benny Zeagler ("Respondents"). The Order imposes civil money penalties against Respondents for violations of section 22(h) of the Federal Reserve Act, 12 U.S.C. §375b, and Regulation O of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 215, as they are made applicable to insured state nonmember banks by section 18(j)(2) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. §1828(j)(2), and section 337.3 of FDIC's Rules of Practice and Procedures, 12 C.F.R. §337.3, respectively.
   Respondents now move that the Board, pursuant to 12 C.F.R. §308.44(b), reconsider its Order. Respondents also move that the Board grant an indefinite stay of its Order, pending determination of the appeal of the Order which they have filed with the United States Court of Appeals for the Fifth Circuit. After full consideration of this matter, the Board denies Respondent's motions for the following reasons.


   On September 28, 1989, the FDIC issued the Notice of Assessment of Civil Money Penalties, Findings of Fact and Conclusions of Law, Order to Pay, and Notice of Hearing (the "Notice of Assessment"), a copy of which was sent to each Respondent. Certified mail receipts indicate that the Notice of Assessment was received by Respondents Carroll, Steen, Whitehead, and Zeagler (or by others on their behalf) on October 3, 1989, and by Respondents Amberg and Causey (or by others on their behalf) on October 4, 1989. {{3-31-91 p.A-1566.2}}
   The Notice of Assessment stated that if Respondent failed to file a request for hearing and an answer to the charges in the Notice of Assessment within twenty days of their receipt of the Notice of Assessment, in accordance with 12 C.F.R. § 308.21, the civil money penalty would be rendered final and unappealable as to that Respondent. Respondents timely filed a request for hearing on October 16, 1989. However, their answers were not filed until October 27, 1989, after the expiration of the twenty-day period.


   The Board denies Respondents' motion for reconsideration because they have failed to show sufficient grounds for reconsideration of their case. Moreover, the Board's Decision is fully supported by the law.

   [.1] The Respondents bear the burden of persuading the Board to reconsider its Order.1 The FDIC's regulations require that, at a minimum, a petitioner seeking reconsideration should "(i) specify reasons why the FDIC should reconsider its action and (ii) set forth relevant information that for good cause was not previously set forth." 12 C.F.R. § 308.44(b).

   [.2] Respondents' first argument is that section 308.21 of the FDIC's Rules of Practice and procedures (12 C.F.R. § 308.21) impermissibly expands upon the mandate of section 18(j)(4)(F) of the FDI Act by requiring an answer as well as a request for hearing, when section 18(j)(4)(F) provides for a hearing if a request is made within the twenty-day period. This argument is untenable. First, agencies are unquestionably free to design procedural rules adapted to the peculiarities of their regulatory mission. FCC v. Schreiber, 381 U.S. 279, 290 (1965). Second, in section 18(j)(5), Congress has explicitly granted the FDIC the power to prescribe "such procedures as may be necessary" to implement section 18(j)(4). 12 U.S.C. § 1828(j)(5). Finally, under Respondents' interpretation of section 18(j)(4)(F), the mere filing of a request for hearing would establish an absolute right to a hearing and, by implication, would restrict the FDIC's power to decide that summary proceedings are appropriate.2 Congress could not have intended such an arbitrary results.

   [.3] Respondents' second argument challenges the provision of section 308.21(d)(1) of the FDIC's Rules of Practice and Procedures that, upon the failure to file a request for hearing and answer within the twenty-day period, the assessment of civil money penalties becomes final and unappealable. Respondents instead assert that once a request for hearing is timely filed, the proceeding becomes a contested matter to be governed by the rules of "ordinary litigation." Respondents also maintain that various standards from the Federal Rules of Civil Procedure should be applied to grant them relief.
   To the contrary, the rules of "ordinary litigation" do not apply to the FDIC's administration proceedings. Rosenthal & Co. v. Commodity Futures Trading Comm'n, 802 F.2d 963, 969 (7th Cir. 1986) (agencies, even when imposing fines, are not subject to procedures required by the courts). In the interest of effective and efficient performance of its Congressionally-mandated regulatory mission, the FDIC has established specialized procedural rules which satisfy due process and the particular requirements of bank regulation. See Schreiber, 381 U.S. at 290. As even Respondents admit at pp. 2–3 of their Memorandum in Support of Motion to Reconsider, the Federal Rules of Civil Procedure are not applicable to administrative hearings. McClelland v. Andrus, 606 F.2d 1278, 1285 (D.C. Cir. 1979); Sloan v. SEC, 547 F.2d 152, 155 (2nd Cir. 1976). Where the Board finds that the content and underlying purpose of the Federal Rules are consistent with the purpose and intent of the FDIC's Rules of Practice and procedures, the Board may look to them for guidance, however, the Federal Rules are persuasive rather than controlling, and where the Federal Rules are inconsistent with the requirements and purposes of the FDIC's Rules of

1 FDIC Enf. Dec. 89-83e, at 3 n.2, (July 24, 1990) (citing Simmons v. ICC, 760 F.2d 126, 132 (7th Cir. 1985), cert. denied, 474 U.S. 1055 (1986)); Coalition on Sensible Transportation,. Inc. v. Dole, 826 F.2d 60, 71 (D.C. Cir. 1987) (administrative rehearing under Federal Aid Highways Act denied because petitioner could not show any significant new information available); Farmers Export Co. v. United States, 758 F.2d 733, 737 (D.C. Cir. 1985) (petitioner required to show "material error, new evidence, or substantially changed circumstances" to obtain rehearing under 49 C.F.R. § 1115.4); Cities of Campbell v. FERC 770 F.2d 1180, 1191 (D.C. Cir. 1985) (petitioner must show extraordinary circumstances to obtain reopening of administrative evidentiary hearing).

2 See FDIC Enf. Dec. 86-107k, 2 Prentice-Hall FDIC Enf. Dec. § 5073 (Aug. 12, 1986) (request for hearing and answer serve different functions, with answer serving to focus attention on facts and issues of the case which are disputed).
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Practice and Procedures, the Board is not bound to follow the Federal Rules. To do so would frustrate Congressional intent that the FDIC apply its specialized expertise for expeditious disposition of the matters entrusted to it.
   Respondents assert that the Board's ruling that "good cause" for extending the time in which to file an answer (under section 308.21(a)(2) of the FDIC Rules of Practice and Procedures) does not include the "excusable neglect" standard of Fed. R. Civ. P. 6(b) was an arbitrary and capricious abuse of discretion. However, routine excuse of oversights or inadvertent mistakes in matters involving the FDIC's procedural timeframes for reasons such as those offered by Respondent would reduce litigants' incentive to comply with the FDIC rules and could result in unnecessary delay sin the administrative process for dealing with bank safety and soundness concerns. Therefore, the Board has limited the facts it will accept as "good cause" to circumstances where a party in unable to or is prevented by matters beyond his or her control from complying with the time limits such as a lack of actual or constructive knowledge, as a factual matter, that a response is required.3 "Excusable neglect," as alleged by Respondents, in misinterpreting the clear mandates of the FDIC Rules of Practice and Procedures and the Notice of Assessment is not an acceptable basis for extending the deadline for the filing of an answer.4
   Respondents also assert that the provision in Fed. R. Civ. P. 55(c) for relief from default for "good cause" should be applied to their case. While the Board to date has not adopted by regulation or decision any provision for administrative relief from default analogous to Fed. R. Civ. P. 55(c), it is unnecessary for the Board to address this issue here because the factual basis urged by Respondents for relief from their default does not meet the "good cause" standard in any event. See note 5, supra.


   The Board denies Respondents' motion for stay of its Order pending appeal because they clearly fail to make a showing that the circumstances of this case warrant one. The granting of a stay is an extraordinary exercise of the Board's discretion. FDIC Enf. Dec. 88-156c&b, at 3 (Nov. 7, 1989); FDIC Enf. Dec. 89-83e, at 4 (July 24, 1989). Respondents bears the burden of demonstrating that this case warrants the issuance of a stay. Id.; Ohio v. NRC, 812 F.2d 288, 290 (6th Cir. 1987); Cuomo v. NRC, 772 F.2d 972, 978 (D.C. Cir. 1985).

   [.4] In deciding whether to grant a motion to stay pending appeal, Respondents must establish that four conditions exist: (1) a likelihood that they will prevail on the merits of the appeal; (2) irreparable injury to the petitioner unless the stay is granted; (3) no substantial harm to other interested persons; and (4) no harm to the public interest. FDIC Enf. Dec. 89-83e, at 5; FDIC Enf. Dec. 83-172b, at 10 (November 19, 1984).
   As for the Respondents' likelihood for success on the merits of its appeal, Respondents assert the same grounds in their motion for stay as they have in their motion for reconsideration, and the Board's discussion of their arguments for reconsideration above indicates that the grounds are without merit. Furthermore, Respondents themselves admit that they "cannot show or urge that irreparable harm would result from an enforcement" of the Order. Respondents' Memorandum in Support of Motion to Stay at p. 3. Mere monetary loss does not satisfy the irreparable injury requirement. Sampson v. Murray, 415 U.S. 61, 90 (1974).
   Finally, Respondents do not allege or present facts to establish that a grant of a stay would not cause substantial harm to others or the public interest. Respondents instead submit that the equities of this case indicate that the status quo should be maintained pending appeal. Congress has charged

3See FDIC Enf. Dec. 88-247k, at p. 9 (May 30, 1989), rejecting the argument that an incorrect legal assumption (a party's contention that he believed his bankruptcy filing stayed the administrative proceeding) constituted "good cause" for late filing of an answer.

4 Even if the Board were to adopt the "excusable neglect" standard, Respondents' error would not fall within it. 12 C.F.R. § 308.21 is clear as to the requirement of a timely answer and the result of a failure to file one. Furthermore, the Notice of Assessment plainly sets forth the requirement for filing an answer and specifically directs Respondents' attention to section 308.21. Respondents' failure to read these provisions with the reasonable care necessary to ascertain their obvious terms is not, in the Board's view, excusable neglect. Winters v. Teledyne Movible Offshore, Inc., 776 F.2d 1304, 1306 (5th Cir. 1985); Marane, Inc. v. McDonald's Corp., 755 F.2d 106, 111 (7th Cir. 1985); Driver v. Gindy Mfg. Corp., 24 F.R.D. 473, 475 (E.D. Pa. 1959).
{{3-31-91 p.A-1566.4}}the Board with preventing and correcting unsafe or unsound practices in the banking industry, and a secure, stable banking system is vital to the public interest of this nation. These concerns must take precedence in this case. Therefore, the Board denies Respondents' motion for stay.


   Accordingly, it is hereby ORDERED that Respondents' Motions for Reconsideration and Stay are hereby DENIED.
   By Direction of the Board of Directors.
   Dated at Washington, D.C., this 2nd day of October, 1990.

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