Leuthe v. Office of Financial Inst. Adjudication, Civil Action No. 96-CV-5725.

• Decision Date: 08 September 1997
• Docket Number: Civil Action No. 96-CV-5725.
• Citation: 977 F.Supp. 357
• Parties: James L. LEUTHE v. OFFICE OF FINANCIAL INSTITUTION ADJUDICATION, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Reserve Board and National Credit Union Administration.
• Court: U.S. District Court — Eastern District of Pennsylvania

977 F.Supp. 357

James L. LEUTHE v.OFFICE OF FINANCIAL INSTITUTION ADJUDICATION, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Reserve Board and National Credit Union Administration.

Civil Action No. 96-CV-5725.

United States District Court, E.D. Pennsylvania.

September 8, 1997.

Kevin T. Fogerty, Allentown, PA, James T. McHale, Scranton, PA, for James L. Leuthe.

James G. Sheehan, Nancy L. Griffin, U.S. Attorney's Office, Philadelphia, PA, National Credit Union Admin.

Aaron B. Kahn, Office of Thrift Supervision, Washington, DC, for Office of Thrift Supervision.

Douglas B. Jordan, Board of Governors of the Federal Reserve System, Washington, DC, for Board of Governors of Federal Reserve System.

Daniel H. Kurtenbach, F.D.I.C., Washington, DC, for F.D.I.C.

Joan Bernott, Ellen M. McElligott, Office of the Comptroller of the Currency, Washington, DC, for Office of the Comptroller of the Currency.

MEMORANDUM AND ORDER

JOYNER, District Judge.

This is an action for declaratory judgment pursuant to which plaintiff seeks to have this Court declare the current procedures for enforcement under the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA") unconstitutional and illegal and the enforcement proceedings presently underway against him to be null and void.Defendants move to dismiss plaintiff's complaint in its entirety and/or for summary judgment.For the following reasons, defendants' motions to dismiss shall be granted.

BACKGROUND

Plaintiff, James L. Leuthe is a named respondent in two enforcement proceedings instituted by defendantFederal Deposit Insurance Corporation("FDIC") pursuant to 12 U.S.C. § 1818 and which are presently pending before Administrative Law Judge Walter J. Alprin.According to plaintiff's complaint the office of Financial Institution Adjudication ("OFIA") is "an organization which functions as a federal agency ..." and is "charged with overseeing the administration of administrative enforcement proceedings."(Plaintiff's Complaint, ¶ s 6, 16).The gist of Mr. Leuthe's complaint is that OFIA was never properly created as a federal agency by Congress and thus, as Judge Alprin is actually an employee of OFIA and not the Office of Thrift Supervision("OTS") or any of the other defendant agencies, he lacks the proper authority to conduct the enforcement proceedings against plaintiff.

Defendants do not dispute that OFIA is not a federal agency in and of itself.¹OFIA was the response to Congress' directive in Section 916 of FIRREA, 12 U.S.C. § 1818 note, that "before the close of the 24-month period beginning on August 9, 1989, the appropriate Federal banking agencies ... and the National Credit Union Administration were to establish jointly their own pool of administrative law judges, and develop a set of uniform rules and procedures for administrative hearings ..."Thus, defendants submit, both of OFIA's Administrative Law Judges were properly appointed by OTS and they have the appropriate authority to act in the enforcement proceedings against plaintiff.

DISCUSSION

By way of the instant motions, defendants specifically contend (1) that plaintiff lacks both Article III and prudential standing to maintain this lawsuit; (2) that 12 U.S.C. § 1818(i) precludes this Court from exercising jurisdiction over this action; and (3) that the complaint fails to state a cause of action upon which relief may be granted.As we find that the district courts have been divested of jurisdiction over matters such as this one, we do not reach defendants' other arguments.

A.Standards Applicable to Motions to Dismiss

Federal Rule of Civil Procedure 12(b) permits the defenses of lack of jurisdiction over the subject matter and the failure to state a claim upon which relief may be granted to be made by motion.Fed.R.Civ.P. 12(b)(1), (6).When a motion under Rule 12 is based on more than one ground, the court should consider the 12(b)(1) challenge first because if it must dismiss the complaint for lack of subject matter jurisdiction, all other defenses and objections become moot.In re Corestates Trust Fee Litigation,837 F.Supp. 104, 105(E.D.Pa.1993), aff'd.39 F.3d 61(3rd Cir.1994).See Also: Freiburger v. Emery Air Charter, Inc.,795 F.Supp. 253(N.D.Ill.1992).

A district court can grant a Rule 12(b)(1)motion to dismiss for lack of subject matter jurisdiction based on the legal insufficiency of the claim.But dismissal is proper only when the claim "appears to be immaterial and made solely for the purpose of obtaining jurisdiction or is wholly insubstantial or frivolous...."When subject matter jurisdiction is challenged under Rule 12(b)(1), the plaintiff must bear the burden of persuasion.Kehr Packages, Inc. v. Fidelcor. Inc.,926 F.2d 1406, 1408-09(3rd Cir.1991);Radeschi v. Commonwealth of Pennsylvania,846 F.Supp. 416, 419(E.D.Pa.1993).

Unlike a motion to dismiss for failure to state a claim under Rule 12(b)(6), when a party attacks the factual allegations of jurisdiction, the courts are not limited in their review to the allegations of the complaint.Any evidence may be reviewed and any factual disputes resolved regarding the allegations giving rise to jurisdiction as it is for the Court to resolve all factual disputes involving the existence of jurisdiction.Sitkoff v. BMW of North America, Inc.,846 F.Supp. 380, 383(E.D.Pa.1994), citingMoore's Federal Practice(Second Ed.)at ¶ 12.07[2.-1].In contrast, if the attack to jurisdiction is facial, that is, the allegations of jurisdiction stated in the complaint, the factual allegations of the complaint are presumed to be true and the complaint is reviewed to ensure that each element necessary for jurisdiction is present.Id.Only if it appears to a certainty that the pleader will not be able to assert a colorable claim of subject matter jurisdiction may the complaint be dismissed under those circumstances.Kronmuller v. West End Fire Co. No. 3,123 F.R.D. 170, 172(E.D.Pa.1988).See Also: Mortensen v. First Federal Savings and Loan Association,549 F.2d 884, 891(3rd Cir.1977).

B.Jurisdiction under 12 U.S.C. § 1818

Applying the foregoing principles to the complaint here, at paragraph 12, plaintiff avers that this Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 as he is challenging the legality and constitutionality of the employment of Administrative Law Judges to preside over administrative enforcement proceedings brought under the Federal Deposit Insurance Act/Financial Institutions Supervisory Act, as amended byFIRREA, 12 U.S.C. § 1818, et. seq.In further support of his claim of federal question jurisdiction, plaintiff alleges that "[p]ursuant to Section 916 of FIRREA, 12 U.S.C.A. Section 1818 note (Supp.1996), Congress purported to authorize the OCC, OTS, FDIC, FRB and NCUA to establish a pool of administrative law judges to handle financial institution administrative proceedings."(Complaint, ¶ 14).

The statutory scheme set out in FISA(as amended byFIRREA), grants federal agencies such as the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Federal Reserve Board wideranging supervisory and enforcement authority over the nation's banking system.Paul v. Office of Thrift Supervision,763 F.Supp. 568, 571(S.D.Fla.1990);First National Bank of Scotia v. United States,530 F.Supp. 162, 166(D.D.C.1982);12 U.S.C. § 1813(q).Section 1818 applies to banks insured through the Federal Deposit Insurance Corporation.That Section authorizes the appropriate regulatory agency (if it believes that an insured depository institution or institution-related party is engaged, has engaged or is about to engage in an unsafe or unsound banking practice, has violated any law or regulation or is about to do so) to deliver to an insured bank or institution-related party notice of charges and/or a cease and desist order.12 U.S.C. § 1818(b).If an institution-affiliated party is charged with a felony or has violated certain laws, the appropriate Federal banking agency is further empowered under §§ 1818(e) and (g) to institute removal proceedings or to suspend that party from office pending resolution of the charges against it.The charged institution or party is then entitled to a hearing within 30-60 days.12 U.S.C. § 1818(e)(4), (g)(3).

Under Section 1818(h), hearings are to be conducted in accordance with the provisions of chapter 5 of Title 5(the Administrative Procedures Act) and,

After such hearing, and within ninety days after the appropriate Federal banking agency or Board of Governors of the Federal Reserve System has notified the parties that the case has been submitted to it for final decision, it shall render its decision ... and shall issue and serve upon each party to the proceeding an order or orders consistent with the provisions of this section.Judicial review of any such order shall be exclusively as provided in this subsection (h) of this section.Unless a petition for review is timely filed in a court of appeals of the United States, as hereinafter provided.... and thereafter until the record in the proceeding has been filed as so provided, the issuing agency may at any time, upon such notice and in such manner as it shall deem proper, modify, terminate or set aside any such order.Upon such filing of the record the agency may modify, terminate or set aside any such order with permission of the court.

12 U.S.C. § 1818(h)(1)(emphasis supplied).Pursuant to § 1818(h)(2),

upon a party's filing of a petition for review in the court of appeals of the United States for the circuit in which the home office of the depository institution is located or in the U.S. Court of Appeals for the District of Columbia Circuit, the Court of Appeals"shall have jurisdiction, which upon the filing of the petition of the record shall, except as provided in the last sentence of said paragr...