Sinclair v. Hawke, 02-1979.

• Citation: 314 F.3d 934
• Decision Date: 03 January 2003
• Docket Number: No. 02-1979.,02-1979.
• Parties: Damian SINCLAIR, individually and as assignee of Sinclair National Bank, Plaintiffs-Appellants, v. John D. HAWKE, Jr., et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

314 F.3d 934

Damian SINCLAIR, individually and as assignee of Sinclair National Bank, Plaintiffs-Appellants, v. John D. HAWKE, Jr., et al., Defendants-Appellees.

No. 02-1979.

United States Court of Appeals, Eighth Circuit.

Submitted: September 9, 2002.

Filed: January 3, 2003.

COPYRIGHT MATERIAL OMITTED

Helen D. Chaitman, argued, New York, NY (Peter W. Smith, on the brief), for appellant.

Rosa M. Koppel, argued, Washington, DC (Julie L. Williams, Daniel P. Stipano and L. Robert Griffin, on the brief), for appellee.

Before LOKEN, FAGG, and RILEY, Circuit Judges.

LOKEN, Circuit Judge.

Exercising his comprehensive authority to regulate national banks, the Comptroller of the Currency declared Sinclair National Bank (SNB) insolvent and appointed the Federal Deposit Insurance Corporation (FDIC) as SNB's receiver under the national banking laws. See 12 U.S.C. §§ 191, 1821(c)(2)(A)(ii). SNB and its owner, Damian Sinclair, sued the Comptroller in his official capacity, the FDIC, and certain employees of the Office of the Comptroller of the Currency (OCC) seeking an order removing the FDIC as receiver and other equitable relief. The district court¹ denied plaintiffs' motion for a temporary restraining order, and the FDIC sold the assets of SNB to another Arkansas bank.

Mr. Sinclair, acting individually and as assignee of SNB, then filed an amended complaint, dropping the agency defendants and the claims for equitable relief and asserting damage claims against the Comptroller and eight other OCC employees, in their individual capacities, for violating the First and Fifth Amendments; two federal civil rights laws, 42 U.S.C. §§ 1981 and 1982; and the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(c). The district court granted defendants' motion to dismiss, concluding that District Deputy Comptroller John Bodnar is entitled to qualified immunity regarding his action in approving Mr. Sinclair's change-of-control application, and that all defendants are entitled to absolute immunity regarding the other regulatory actions challenged in the amended complaint. Mr. Sinclair appeals the court's absolute immunity ruling. Concluding that the amended complaint fails to state a claim upon which relief can be granted, we affirm without reaching the absolute immunity issue. See Abels v. Farmers Commodities Corp., 259 F.3d 910, 916 (8th Cir.2001) (standard of review).

I. Background.

In 1999, Northwest National Bank was a distressed bank operating in Gravette, Arkansas, under a Memorandum of Understanding with the OCC. Mr. Sinclair filed a change-in-control application with the OCC, stating his intent to purchase the bank and submitting a business plan in which the bank would purchase large pools of non-prime consumer loans to low-income borrowers from Stevens Financial Group, Inc., a company formerly owned by Mr. Sinclair. The OCC approved the change of ownership provided the bank would maintain enhanced capital ratios. In March 2000, Mr. Sinclair agreed to that condition, purchased the bank for $2.75 million, changed the bank's name to SNB, and contributed an additional $2 million to the bank's capital. The District Deputy Comptroller primarily responsible for oversight of SNB immediately received a letter from the FDIC criticizing the OCC for approving the change in ownership without considering the FDIC's negative comments regarding Mr. Sinclair's business plan. Thus began a contentious two-year regulatory relationship during which, the amended complaint alleges, OCC officials took the following actions against SNB:

• In April 2000, OCC began "a persistent series of directives and criticisms, each of increasing severity, none of which was based on a comprehensive examination of the actual loan files." A May 17 OCC letter alleged that the bulk loans purchased by SNB violated the legal lending limit.

• On June 28, 2000, the OCC issued a Safety and Soundness Notice of Deficiency criticizing SNB's management and monitoring of its non-prime loans and containing "numerous contrived and specious allegations." The statute authorizes the OCC to commence cease-and-desist proceedings if "in the opinion of" the agency, a national bank "is engaging or has engaged ... in an unsafe or unsound practice." 18 U.S.C. § 1818(b)(1). The Comptroller's regulations authorize the OCC to issue a Notice of Deficiency to request a compliance plan. See 12 C.F.R. § 30.3(b).²

• In September 2000, OCC officials demanded that SNB limit non-prime minority and low-income loans to one-hundred percent of the bank's capital. OCC threatened to issue a safety and soundness order if SNB did not comply. Because this "patently punitive demand" would leave SNB unable to implement its business plan, SNB sued the OCC in the United States Court of Federal Claims for breach of an alleged contract defining the capital requirements OCC would impose. SNB also sued various OCC officials in the District of Columbia District Court, asserting the constitutional violations alleged in this lawsuit and seeking declaratory and injunctive relief from the threatened regulatory action.³

• The OCC conducted two lengthy on-site examinations of SNB in late 2000 and early 2001 that "totally paralyzed SNB's activities by virtue of the [examiners'] constant and deliberate interference." The National Bank Act authorizes the Comptroller to "appoint examiners who shall examine every national bank as often as the Comptroller ... shall deem necessary." 12 U.S.C. § 481.

• In December 2000, the OCC concluded that SNB's proposed compliance plan was inadequate and issued a Notice of Intent to Issue a Safety and Soundness Order, a regulatory action authorized by 12 C.F.R. § 30.5(a). In response, SNB submitted another compliance plan. In March 2001, the OCC criticized that plan and imposed "restrictions on non-prime lending that made it impossible for SNB to carry out the business plan that the OCC had expressly approved just one year earlier."

• In April 2001, the OCC issued a Cease and Desist Consent Order. When SNB refused to consent, the agency issued a Notice of Charges on June 7, 2001, as authorized by 12 U.S.C. § 1818(b)(1). SNB answered the Charges, and an administrative law judge set a discovery schedule.

• In early August 2001, the OCC reclassified SNB's loan portfolio, declared SNB "critically undercapitalized," and issued a Prompt Corrective Action Directive requiring SNB to submit a capital restoration plan and take other corrective actions, a directive authorized by statute, see 12 U.S.C. § 1831o (e)(2) & (i), and by the Comptroller's regulations, which provide for a prompt administrative appeal, see 12 C.F.R. § 6.21(a)(2). SNB filed a capital restoration plan and an administrative appeal. In addition, the Chapter 11 trustee for Stevens Financial Group submitted a change-of-control application to the OCC, seeking to purchase SNB from Mr. Sinclair for $2 million. When the OCC denied SNB's request for a hearing and more time to respond, SNB and Mr. Sinclair filed their initial Petition for Review of Agency Action and Complaint in the district court. After a telephonic hearing the next day, the district court denied plaintiffs' motion for a temporary restraining order.

• In early September 2001, the OCC declared SNB insolvent, appointed the FDIC as SNB's statutory receiver, and terminated the pending administrative proceeding as moot. See 12 U.S.C. §§ 191, 1821(c)(2)(A)(ii). The district court declined to enjoin the receivership, the FDIC sold SNB's assets to another bank, and Mr. Sinclair alleges he lost the ability to recover his investment in SNB.

After setting forth the above-summarized dispute in great detail, the amended complaint asserts the following compensatory and punitive damages claims on behalf of Mr. Sinclair personally and as SNB's assignee:

1. Fifth Amendment equal protection and procedural and substantive due process claims under Bivens v. Six Unknown Named Agents of the Fed. Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), alleging that the OCC officials took the above regulatory actions for retaliatory and vindictive purposes and to discriminate against minority borrowers.

2. First Amendment Bivens claims alleging that, beginning in December 2000 all the OCC regulatory actions were taken in retaliation for SNB's exercise of its First Amendment right to file the two lawsuits SNB filed that fall.

3. Claims of race discrimination under 42 U.S.C. §§ 1981 and 1982. In support of these claims, the amended complaint alleges that various OCC officials made statements over the course of the two-year dispute evidencing their hostility toward minority borrowers, statements of the kind we have called "stray remarks" in the more familiar context of employment discrimination disputes.

4. RICO claims alleging that defendants "conspired to fraudulently approve the charter for SNB and then institute a program of regulatory action to force SNB to abandon its non-prime lending programs" as part of a pattern of racketeering activity "designed to deprive minorities from having ownership of significant national banks and to prevent minority and low-income borrowers from having access to credit."

By these claims, Mr. Sinclair seeks to have a jury decide whether defendants' facially lawful regulatory actions were the product of an unlawful motive. To our knowledge, such judicial review of the actions of federal bank regulators would be unprecedented. The issue, broadly stated, is whether Congress has authorized wide-ranging judicial review of regulators' motives in personal damage actions that might have a chilling effect on their willingness to aggressively attack unsafe and unsound banking practices.

II. The Constitutional and Civil Rights Act Claims.

A. Mr. Sinclair's Individual Claims. The amended complaint alleges that Mr. Sinclair was sole shareholder and chairman of the board of SNB and "was damaged in his business...