Banking and Finance Law Daily Wrap Up, ENFORCEMENT ACTIONS—D.D.C.: Response to motion to dismiss filed in FDIC enforcement action, (Sep 9, 2024)

By Charles A. Menke, J.D.

The response argued that the complaint was “firmly grounded in recent Supreme Court precedent” and, accordingly, the FDIC’s motion should be denied in its entirety.

An organization seeking a jury trial for an individual named in an FDIC enforcement action filed a response to a motion to dismiss filed by the Federal Deposit Insurance Corporation. The group, the New Civil Liberties Alliance (NCLA) seeks relief on behalf of John C. Ponte, including a temporary restraining order enjoining FDIC enforcement action against Ponte and a jury trial (Ponte v. Federal Deposit Insurance Corporation, No. 1:24-cv-02379 (D.D.C. Sept. 6, 2024)).

History. The action arose following an FDIC enforcement action against Rhode Island-based Independence Bank. Ponte was named as a party to the action, with the FDIC complaint alleging that he was “an institution-affiliated party of the Bank” and “directly or indirectly violated regulations and recklessly engaged in unsafe or unsound practices in connect with the Bank” between 2017 and 2019.

However, the NCLA then filed, on Ponte’s behalf, a complaint in the district court of the District of Columbia, arguing that the administrative proceeding was unlawful and that the action unconstitutionally denied Ponte his right to jury trial in an Article III court. The suit also sought a temporary restraining order enjoining the FDIC from proceeding against Ponte in the enforcement action. The NCLA argued in its suit that SEC v. Cochran confirmed that constitutional claims against administrative proceedings could be brought directly before federal courts. The suit also alleged that, pursuant to SEC v. Jarkesy, the FDIC enforcement action violates Ponte’s Seventh Amendment right to a jury trial (see Banking and Finance Law Daily, Aug. 20, 2024).

The FDIC moved to dismiss the compliant arguing that Ponte failed to sufficiently plead irreparable harm to be entitled to a restraining order, and also failed to demonstrate a likelihood of prevailing on the underlying question (see Banking and Finance Law Daily, Aug. 26, 2024). Ponte previously replied to the FDIC’s opposition to the petition for a temporary restraining order (see Banking and Finance Law Daily, Sept. 4, 2024).

The response argues the court has subject matter jurisdiction because the claims in the earlier cases “are wholly factually and legally separate from the constitutional claims in this case and cannot in any way preclude this Court’s jurisdiction.” The response additionally contends that the opinion in Jarkesy as well as the constitutional right to a jury trial right that is at issue undermine those cases cited by the FDIC in support of its claim that the court is without its normal federal question jurisdiction.“ The FDIC’s arguments are practically nonsensical after Jarkesy” and “[t]he Court should also look at the FDIC’s behavior and its actions before and after Jarkesy to assess the proper state of the allegations.”

The response additionally rebuts the FDIC’s contention that a “public right” right exists invalidating Ponte’s jury claim. “There are private banks, and they are regulated,” the response said. “That does not mean that the contracts of everyone who then contracts with a bank becomes a public right.” According to the response, the FDIC’s arguments on public rights were completely rejected in Jarkesy.

Attorneys: Kara McKenna Rollins (New Civil Liberties Alliance) for John C. Ponte. Andrew Jared Dober for Federal Deposit Insurance Corp.

Companies: Independence Bank; New Civil Liberties Alliance

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