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Abercrombie v. Office of Comptroller of Currency

decided: November 12, 1987.


Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division, No. 86 C 825, William E. Steckler, Chief Judge.

Coffey, Ripple, and Manion, Circuit Judges.

Author: Manion

MANION, Circuit Judge.

Plaintiffs, Manley Abercrombie, Richard Calloway, Richard Eckel, Donald E. Hedrick, and E. Weston Sloan (the directors) are directors of the Rushville (Indiana) National Bank (Bank). The directors filed a complaint in the Southern District of Indiana seeking to enjoin the Office of the Comptroller of the Currency (Comptroller) from imposing civil money penalties (CMP's) on them pursuant to 12 U.S.C. § 1818(i)(2)(i). The district court denied the directors relief, holding that it had no jurisdiction to enjoin the Comptroller's actions. Abercrombie v. Office of the Comptroller of the Currency, 641 F. Supp. 598 (S.D. Ind. 1986). We affirm the district court's judgment that it lacked jurisdiction.


The Comptroller regulates this country's national banks, including the Rushville National Bank. Since 1974, the Comptroller has been concerned with several problems at the Bank that, in the Comptroller's estimation, affected the Bank's ability to operate safely and soundly. According to the Comptroller, the Bank's problems included deteriorating asset quality, failure to adhere to the Bank's lending policy, inadequately supervised lending, excessive expense charges, and conflicts of interest.

On June 29, 1983, the Comptroller and the Bank agreed to a cease and desist order. See 12 U.S.C. § 1818(b) (authorizing the appropriate federal banking agency to order any insured bank to cease and desist any unsafe or unsound banking practice or violation of banking laws; a bank may consent to cease and desist order). On June 19, 1984, the Comptroller and the Bank agreed to amend the outstanding cease and desist order. The cease and desist order, and amendments, addressed what the Comptroller perceived to be the Bank's continuing problems.

The Comptroller examined the Bank several times between June, 1983 and January, 1985. According to the Comptroller, these examinations revealed that the Bank was not complying with the cease and desist order. The Comptroller concluded from the Bank's repeated noncompliance with the cease and desist order that the Bank's directors had not adequately supervised the Bank to ensure compliance.

12 U.S.C. § 1818(i)(2)(i) allows the Comptroller to assess civil money penalties against directors of banks that violate cease and desist orders:

(2)(i) Any insured bank which violates or any officer, director, employee, agent, or other person participating in the conduct of the affairs of such a bank who violates the terms of any order which has become final and was issued pursuant to subsection (b), (c), or (s) of this section, shall forfeit and pay a civil penalty of not more than $1,000 per day for each day during which such violation continues . . . . The penalty may be assessed and collected by the appropriate Federal banking agency by written notice. As used in this section, the term "violates" includes without any limitation any action (alone or with another or others) for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation.

On October 25, 1985, the Comptroller assessed a $15,000 CMP against Hedrick, and $10,000 CMP's against Abercrombie, Calloway, Eckel, Sloan, and William F. Smith (a director who settled with the Comptroller and is not a party to this appeal). The Comptroller apparently assessed the CMP's for violations that occurred well before October, 1985, since the Notice of Assessment specifically mentioned ten violations of the amended cease and desist order that the Comptroller found during a January 31, 1985 examination. The Notice of Assessment did not state on how many or on which days the violations had occurred, nor did it state whether the violations still existed as of October 25, 1985.

On November 6, 1985, the directors requested an administrative hearing pursuant to 12 U.S.C. § 1818(i)(2)(iii) to challenge the penalty assessments. The directors soon changed their strategy, however, and filed a motion requesting the administrative law judge (ALJ) to dismiss the administrative proceedings, alleging that the Comptroller had no authority to assess CMP's against them for violations that occurred before the assessment. The ALJ rejected the directors' contention and denied their motion. On July 2, 1986, the directors sued in district court seeking to enjoin the administrative proceedings and the imposition of CMP's against them. The district court denied the directors' application for injunction. 641 F. Supp. at 600. The district court, after examining § 1818, concluded that Congress had specifically withdrawn jurisdiction from the district courts to enjoin action taken by the Comptroller under that section. Id. The district court, though, stated that jurisdiction would exist if the action was "a clear departure from statutory authority." Id. (citing Groos National Bank v. Comptroller of the Currency, 573 F.2d 889, 895 (5th Cir. 1978)). The district court held that the Comptroller acted within his statutory authority in assessing CMP's against the directors. Therefore, the court held that it had no jurisdiction to enjoin the administrative action here. Id. at 601-03.


Federal courts are courts of limited jurisdiction. All federal courts, other than the Supreme Court, derive their jurisdiction from Congress' exercise of its power under Article III, § 1 of the Constitution to "ordain and establish" inferior courts. Lockerty v. Phillips, 319 U.S. 182, 187, 87 L. Ed. 1339, 63 S. Ct. 1019 (1943). "The Congressional power to ordain and establish inferior courts includes the power of 'investing them with jurisdiction either limited, concurrent, or exclusive, and of withholding jurisdiction from them in the exact degrees and ...

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