On March 3, the U.S. District Court for the District of Kansas dismissed a constitutional challenge to enforcement proceedings by the FDIC, ruling the court lacked subject matter jurisdiction over the plaintiff’s claims. As previously covered by InfoBytes, the bank at issue sought to block an enforcement action imposing a $20.5 million penalty for alleged AML violations. Instead of contesting the penalty, the bank argued it was entitled to a jury trial under the Seventh Amendment and that the administrative law judges (ALJs) presiding over the case were unconstitutionally insulated from removal. The bank cited the U.S. Supreme Court’s ruling in SEC v. Jarkesy (2024), which held that similar in-house proceedings at the SEC violated the Seventh Amendment.

This bank’s defense came in light of a DOJ § 530D letter disclosing that DOJ will no longer defend the constitutionality of statutes that protected ALJs from removal (covered by InfoBytes here). In this case, the FDIC previously informed the court it would no longer defend its use of ALJs (here).

The court declined to address the merits of the plaintiff’s claims, stating that the governing statute (12 U.S.C. § 1818) contains a broad jurisdictional bar preventing courts from interfering with agency enforcement actions — except in two limited circumstances (neither of which applied). The court further rejected arguments that a constitutional challenge should override this restriction, distinguishing the case from Axon Enterprise Inc. v. FTC (2023), in which the Supreme Court allowed certain constitutional claims to bypass administrative review. Unlike Axon, the court noted the statute at issue here explicitly stripped jurisdiction from federal courts, meaning that any challenge must proceed through the agency before reaching appellate review.