On November 19, a Kansas state chartered bank filed a complaint for declaratory and injunctive relief against the FDIC and two Administrative Law Judges (ALJs) from the Office of Financial Institution Adjudication. The plaintiff alleged the FDIC’s attempt to impose civil monetary penalties through an administrative proceeding violated the U.S. Constitution.

Specifically, the plaintiff argued that the FDIC’s proceedings violate the Seventh Amendment by seeking to impose civil monetary penalties through an ALJ acting as a “fact-finder” instead of through a jury in an Article III court. The plaintiff emphasized the Seventh Amendment preserves the right to a jury trial in suits at common law, and that civil penalties are a type of remedy that historically are to be imposed by a jury. The complaint cited Supreme Court rulings, such as SEC v. Jarkesy, to support the argument that the imposition of such penalties by an ALJ, rather than a jury, is unconstitutional.

Additionally, the plaintiff contended ALJs are unconstitutionally insulated from presidential oversight due to two layers of removal protection — “that is, when the ALJs are removable only for cause, by officials who themselves are removable only for cause” — which violates Article II of the Constitution. The plaintiff alleged his lack of removal protection of FDIC ALJs “produces an administrative bureaucracy that operates on regulated parties without the constitutionally required ‘degree of electoral accountability.’” In sum, the plaintiff sought a court declaration that the FDIC’s structure and proceedings are unconstitutional, an injunction to halt the current administrative proceedings, and a permanent injunction to prevent the FDIC from pursuing penalties in this manner. The plaintiff also requested the return of privileged documents obtained by the FDIC and compensation for legal costs.