Feinberg v. Federal Deposit Ins. Corp.

• Decision Date: 17 November 1975
• Docket Number: No. 74-1970,74-1970
• Citation: 173 U.S.App.D.C. 120,522 F.2d 1335
• Parties: Bernard FEINBERG, Appellant, v. The FEDERAL DEPOSIT INSURANCE CORPORATION et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1335

522 F.2d 1335

173 U.S.App.D.C. 120

Bernard FEINBERG, Appellant, v. The FEDERAL DEPOSIT INSURANCE CORPORATION et al.

No. 74-1970.

United States Court of Appeals, District of Columbia Circuit.

Argued April 21, 1975.

Decided Nov. 17, 1975.

Richard W. Skillman, Washington, D. C., with whom Ralph A. Muoio and John F. Dienelt, Washington, D. C., were on the brief for appellant.

James J. Sexton, Counsel, Federal Deposit Ins. Corp., with whom Earl J. Silbert, U. S. Atty., Burton L. Raimi, Asst. Gen. Counsel, Douglas H. Jones, Atty., Federal Deposit Ins. Corp., were on the brief for appellee. John A. Terry and Gerard F. Treanor, Jr., Asst. U. S. Attys., also entered appearances for appellee.

Before TAMM and MacKINNON, Circuit Judges, and JAMESON, ^* Senior United States District Judge for the District of Montana.

TAMM, Circuit Judge:

In this action, plaintiff-appellant Bernard Feinberg challenges the constitutionality of sections 8(g)(1) and 8(i) of the Federal Deposit Insurance Act, 12 U.S.C. §§ 1818(g)(1) and 1818(i) (1969), and seeks to enjoin the Federal Deposit Insurance Corporation (hereinafter Corporation) and its agents from enforcing a Notice and Order of Suspension issued against him under section 8(g)(1). The issue on appeal is narrowly confined to whether the district court erred in denying appellant's application for a three-judge court and in dismissing his complaint for failure to state a claim upon which relief can be granted and for lack of subject matter jurisdiction. Because we hold that appellant's complaint raises substantial constitutional questions required to be heard and determined by a three-judge court under 28 U.S.C. §§ 2282 and 2284, we must remand the case to the district court. We reach no decision on the merits of appellant's constitutional claims except insofar as we determine that they rise to the threshold level of substantiality requiring convention of a three-judge court.

I. The Factual Background

Prior to February 8, 1974, appellant had served for 14 years as president and as a director of the Jefferson State Bank of Chicago, Illinois. In 1973 his annual salary was $55,000. In addition, appellant owns 28% Of the bank's outstanding stock and, as administrator of his deceased brother's estate, manages another 23%, making him the controlling shareholder. The bank's accounts are insured by the Federal Deposit Insurance Corporation.

In May of 1973, appellant was indicted by a federal grand jury on nine counts of mail fraud under 18 U.S.C. § 1341. The indictment alleged participation in a fraudulent scheme to evade property taxes by, Inter alia, submitting to the Cook County Board of Appeals certain altered building permits indicating that buildings on various properties had been razed and that the lots were vacant when, in fact, the buildings had been standing and occupied during the relevant tax period. Appellee's Br. at 1.

On February 8, 1974, nine months after the indictment, ¹ the Corporation issued a Notice and Order of Suspension under section 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(g)(1), suspending Feinberg from his positions as president and director of the bank and prohibiting his further participation in the bank's affairs until disposition of the indictment or termination of the order by the Corporation. ² Section 8(g)(1) provides in relevant part Whenever any director or officer of an insured bank, or other person participating in the conduct of the affairs of such bank, is charged in any information, indictment, or complaint authorized by a United States attorney, with the commission of or participation in a felony involving dishonesty or breach of trust, the appropriate Federal banking agency may, by written notice served upon such director, officer, or other person suspend him from office and/or prohibit him from further participation in any manner in the conduct of the affairs of the bank. A copy of such notice shall also be served upon the bank. Such suspension and/or prohibition shall remain in effect until such information, indictment, or complaint is finally disposed of or until terminated by the agency. . . .

12 U.S.C. § 1818(g)(1) (1969).

On July 31, 1974, appellant filed a complaint in the District Court for the District of Columbia ³ in which he sought convention of a three-judge court under 28 U.S.C. §§ 2282 and 2284 and a declaration by that court that section 8(g)(1) is unconstitutional on its face in that it authorizes the Corporation to effect a substantial deprivation of liberty and property without satisfying minimal due process requirements. Specifically, appellant claimed that the lack of any standards other than the mere fact of a felony indictment, and the lack of any provision in the Act for notice, hearing, or judicial review of section 8(g)(1) suspension orders, rendered the Notice and Order of Suspension against him void; consequently, he sought to enjoin its enforcement.

The Corporation responded with a motion to dismiss for lack of subject matter jurisdiction predicated on section 8(i) of the Act. That section provides in pertinent part:

(E)xcept as otherwise provided in this section no court shall have jurisdiction to affect by injunction or otherwise the issuance or enforcement of any notice or order under this section, or to review, modify, suspend, terminate, or set aside any such notice or order.

12 U.S.C. § 1818(i) (1969). The statute makes no other provision for judicial or administrative review of section 8(g)(1) suspension orders, either before or after their issuance. In addition, the Corporation argued that appellant's complaint should be dismissed for failure to state a claim upon which relief can be granted, I. e., for failure to present a substantial constitutional claim requiring convention of a three-judge court.

Appellant's motions for convention of a three-judge court and for a preliminary injunction, along with appellee's motion to dismiss, were heard on October 15, 1974. At the conclusion of the arguments, the trial judge granted appellee's motion to dismiss, stating:

The Court feels that the Congress acted within its Constitutional authority, by statute specifically withdrew jurisdiction from the United States District Court here, and also finds that § 8(g)(1) clearly constitutes a valid exercise of Congressional power in an area in which the Congress clearly has jurisdiction.

Record at 26-27. The court thus found both that it lacked jurisdiction to hear the case due to the statutory withdrawal provision and that appellant's complaint failed to raise substantial constitutional claims requiring convention of a three-judge court. Appellee's Br. at 34. Because we believe that the constitutionality of sections 8(g)(1) and 8(i) may be reasonably questioned insofar as they operate together to deprive appellant of his job and the right to vote his stock without the benefit of a hearing or any type of administrative or judicial review, we hold that the constitutional issues raised in the complaint are substantial and are required to be heard and determined by a three-judge court.

II. Jurisdiction and Standard of Review

In recent years the three-judge court has come under close scrutiny. Many commentators have argued that the three-judge court statutes, 28 U.S.C. §§ 2281 (injunction against enforcement of State statute) and 2282 (injunction against enforcement of Federal statute), have outlived their original usefulness in protecting state and federal statutes from invalidation by a single district judge and should therefore be eliminated as a needless waste of judicial resources. See, e. g., MTM, Inc. v. Baxley, 420 U.S. 799, 808, 95 S.Ct. 1278, 43 L.Ed.2d 636 (1975) (Douglas, J., dissenting), Citing Statement of Charles Alan Wright, Hearings on S.1876 before the Subcommittee on Improvements in Judicial Machinery of the Senate Committee on the Judiciary, 92d Cong., 2d Sess. 763, 773 (1972). Moreover, under the current status of the law, substantial difficulties can, and often do, arise as to whether initial decisions should be made by a single judge or three judges and as to whether appeals should be to the courts of appeals or to the Supreme Court. 420 U.S. at 809, 95 S.Ct. 1278 (Douglas, J., dissenting). It is now well established, however, despite a somewhat confusing evolution, ⁴ that where a single district judge dismisses an action for failure to state a claim upon which relief can be granted, or for lack of jurisdiction, appeal lies to the court of appeals, and not to the Supreme Court, even though the case on its merits would be required to be heard by a three-judge court. Schackman v. Arnebergh, 387 U.S. 427, 87 S.Ct. 1622, 18 L.Ed.2d 865 (1967); Wilson v. City of Port Lavaca, 391 U.S. 352, 88 S.Ct. 1502, 20 L.Ed.2d 636 (1968); Mengelkoch v. Industrial Welfare Commission, 393 U.S. 83, 89 S.Ct. 60, 21 L.Ed.2d 215 (1968); Hicks v. Pleasure House, Inc., 404 U.S. 1, 92 S.Ct. 5, 30 L.Ed.2d 1 (1971). Cf. MTM, Inc. v. Baxley, supra.

The statute upon which appellant bases his request, 28 U.S.C. § 2282, prohibits a district court or judge thereof from granting an injunction restraining the execution of an Act of Congress "unless the application is heard and determined by a district court of three judges." When an action requires hearing and determination by a three-judge court, 28 U.S.C. § 2284 then requires the single district judge to whom the application for relief is presented "immediately (to) notify the chief judge of the circuit, who shall designate two other judges, at least one of whom shall be a circuit judge." Thus, on paper the requirement of the statute appears relatively simple. In practice it is not, however, since the statute leaves to the district judge the vexing initial determination of whether an action is required to be heard and determined by a three-judge court.

A single district judge need not request that a three-judge court be convened if a case...