{ "attribution": { "source": "legal.exploreworldai.com", "canonical": "https://legal.exploreworldai.com/api/public/v1/judgment-text?id=us:ca7-24-3296-2026-08-12", "cite_as": "NovaCopilot, legal.exploreworldai.com (https://legal.exploreworldai.com/api/public/v1/judgment-text?id=us:ca7-24-3296-2026-08-12)", "license": "https://legal.exploreworldai.com/revision", "version": "legal-2026-09-28", "fingerprint": "ewai:se:3cf8a5", "proof": "sha256:70cc1251b64d9b1f48924511452e120d54335e247c7c9fa2a72afd9062b94e9c", "jurisdiction": "se", "lang": "en", "publisher": "NovaCopilot by ExploreWorld Legal", "terms": "https://legal.exploreworldai.com/om" }, "brand_source": "Source: NovaCopilot", "brand": { "product": "NovaCopilot", "platform": "ExploreWorldAI", "infrastructure": "ExploreWorld Legal", "infrastructure_url": "legal.exploreworldai.com", "legal_entity": "Valkiv Ventures AB", "permanent_url": "https://legal.exploreworldai.com/novacopilot", "source": "Source: NovaCopilot", "powered_by": "Powered by NovaCopilot", "license": "https://legal.exploreworldai.com/licensvillkor", "contact": "stig@valkiv.com" }, "item": { "schema_version": "1.0.0", "id": "us:ca7-24-3296-2026-08-12", "jurisdiction": "us", "lang": "en", "brand_source": "Source: NovaCopilot", "brand": { "product": "NovaCopilot", "platform": "ExploreWorldAI", "infrastructure": "ExploreWorld Legal", "infrastructure_url": "legal.exploreworldai.com", "legal_entity": "Valkiv Ventures AB", "permanent_url": "https://legal.exploreworldai.com/novacopilot", "source": "Source: NovaCopilot", "powered_by": "Powered by NovaCopilot", "license": "https://legal.exploreworldai.com/licensvillkor", "contact": "stig@valkiv.com" }, "sections": [ { "title": "In the", "paragraphs": [] }, { "title": "United States Court of Appeals", "paragraphs": [] }, { "title": "For the Seventh Circuit", "paragraphs": [ "para_4" ] }, { "title": "No. 24-3296", "paragraphs": [] }, { "title": "FRANK WILLIAM BONAN, II, individually and as an institu-", "paragraphs": [ "para_7", "para_8", "para_9", "para_10", "para_11", "para_12", "para_13" ] }, { "title": "Petition for Review of", "paragraphs": [ "para_15", "para_16", "para_17" ] }, { "title": "ARGUED SEPTEMBER 3, 2025 — DECIDED AUGUST 12, 2026", "paragraphs": [ "para_19", "para_20" ] }, { "title": "SCUDDER, Circuit Judge. Frank William Bonan II was a", "paragraphs": [ "para_22", "para_23", "para_24", "para_25" ] }, { "title": "Board of Directors found that Bonan had engaged in unsafe", "paragraphs": [] }, { "title": "2 No. 24-3296", "paragraphs": [ "para_28", "para_29" ] }, { "title": "U.S.C. § 1818(e) prohibiting Bonan from working at any", "paragraphs": [] }, { "title": "FDIC-insured institution and assessed a $105,000 civil money", "paragraphs": [ "para_32", "para_33", "para_34", "para_35", "para_36", "para_37", "para_38", "para_39", "para_40", "para_41" ] }, { "title": "I", "paragraphs": [] }, { "title": "A", "paragraphs": [] }, { "title": "Frank Bonan served as chairman of the Board of Directors", "paragraphs": [ "para_45", "para_46", "para_47", "para_48", "para_49" ] }, { "title": "Bonan simultaneously held meaningful roles at People’s Na-", "paragraphs": [ "para_51", "para_52", "para_53", "para_54" ] }, { "title": "The key events underlying the FDIC’s enforcement action", "paragraphs": [ "para_56" ] }, { "title": "Evergreen Properties (and related borrowers), which", "paragraphs": [] }, { "title": "No. 24-3296 3", "paragraphs": [ "para_59", "para_60", "para_61", "para_62", "para_63", "para_64" ] }, { "title": "1. The 618 Holdings Loan", "paragraphs": [ "para_66" ] }, { "title": "Evergreen, in turn, confronted financial difficulties, prompt-", "paragraphs": [ "para_68", "para_69", "para_70", "para_71", "para_72" ] }, { "title": "One piece of Bonan’s plan centered on a local commercial", "paragraphs": [ "para_74", "para_75", "para_76" ] }, { "title": "Grand Rivers’s $638,000 second mortgage. Bonan contem-", "paragraphs": [ "para_78", "para_79", "para_80", "para_81" ] }, { "title": "While Bonan originally envisioned that his personal com-", "paragraphs": [ "para_83", "para_84" ] }, { "title": "Tate. In December 2015, Bonan asked them to purchase the", "paragraphs": [ "para_86", "para_87", "para_88" ] }, { "title": "4 No. 24-3296", "paragraphs": [ "para_90", "para_91", "para_92" ] }, { "title": "On or before December 17, 2015, Bonan directed Grand", "paragraphs": [] }, { "title": "Rivers’s Chief Financial Officer to prepare a loan request on", "paragraphs": [ "para_95", "para_96", "para_97", "para_98" ] }, { "title": "On December 23, the Grand Rivers Board of Directors", "paragraphs": [ "para_100", "para_101", "para_102", "para_103", "para_104", "para_105", "para_106", "para_107" ] }, { "title": "The final loan from Grand Rivers to 618 Holdings was for", "paragraphs": [ "para_109" ] }, { "title": "(totaling $93,035.28 per year). The amount due annually ex-", "paragraphs": [ "para_111" ] }, { "title": "Additionally, 618 Holdings used this loan to purchase the", "paragraphs": [ "para_113", "para_114", "para_115", "para_116", "para_117", "para_118" ] }, { "title": "No. 24-3296 5", "paragraphs": [] }, { "title": "What all of this means is that Grand Rivers’s loan funded", "paragraphs": [ "para_121", "para_122" ] }, { "title": "Holdings with money to repay the loan. Grand Rivers’s Chief", "paragraphs": [] }, { "title": "Financial Officer testified that he structured the transaction", "paragraphs": [ "para_125", "para_126" ] }, { "title": "Bonan had negotiated when contemplating the purchase him-", "paragraphs": [ "para_128" ] }, { "title": "In January 2016, two FDIC examiners reviewed the 618", "paragraphs": [] }, { "title": "Holdings loan. They classified it as substandard “due to the", "paragraphs": [ "para_131", "para_132", "para_133", "para_134", "para_135", "para_136" ] }, { "title": "In April 2016, Grand Rivers placed the 618 Holdings loan", "paragraphs": [ "para_138", "para_139", "para_140", "para_141", "para_142", "para_143" ] }, { "title": "2. The Release of the Rig 23 Collateral", "paragraphs": [] }, { "title": "The second event involves a series of errors related to an-", "paragraphs": [ "para_146", "para_147", "para_148", "para_149" ] }, { "title": "6 No. 24-3296", "paragraphs": [] }, { "title": "The mistake occurred in conjunction with Evergreen’s sale of", "paragraphs": [] }, { "title": "Rig 24, a less valuable oil drilling rig in which Grand Rivers", "paragraphs": [ "para_153", "para_154", "para_155", "para_156", "para_157" ] }, { "title": "B", "paragraphs": [] }, { "title": "In May 2021, the FDIC initiated an administrative enforce-", "paragraphs": [ "para_160", "para_161" ] }, { "title": "Bonan had engaged in unsafe or unsound banking practices", "paragraphs": [ "para_163", "para_164", "para_165", "para_166" ] }, { "title": "In January 2023, an FDIC administrative law judge con-", "paragraphs": [ "para_168", "para_169", "para_170", "para_171", "para_172", "para_173" ] }, { "title": "In December 2024, the FDIC Board issued its decision and", "paragraphs": [ "para_175", "para_176", "para_177" ] }, { "title": "And, based on similar reasoning, the Board also found that", "paragraphs": [] }, { "title": "Bonan’s involvement in the 618 Holdings loan merited a sec-", "paragraphs": [ "para_180" ] }, { "title": "No. 24-3296 7", "paragraphs": [ "para_182", "para_183", "para_184", "para_185", "para_186", "para_187", "para_188", "para_189", "para_190" ] }, { "title": "II", "paragraphs": [] }, { "title": "We begin with Bonan’s contention that the FDIC’s in-", "paragraphs": [ "para_193", "para_194", "para_195" ] }, { "title": "The Seventh Amendment provides that “[i]n Suits at com-", "paragraphs": [ "para_197" ] }, { "title": "Const. amend. VII. In SEC v. Jarkesy, the Supreme Court es-", "paragraphs": [ "para_199", "para_200", "para_201", "para_202" ] }, { "title": "Seventh Amendment.” Id. at 120. If the answer at the first step", "paragraphs": [ "para_204", "para_205", "para_206", "para_207", "para_208" ] }, { "title": "The first step is straightforward here. The Seventh", "paragraphs": [] }, { "title": "Amendment, the Court has explained, extends to statutory", "paragraphs": [ "para_211" ] }, { "title": "8 No. 24-3296", "paragraphs": [ "para_213", "para_214", "para_215" ] }, { "title": "States, 481 U.S. 412, 421 (1987) (“[T]he relief sought is more", "paragraphs": [ "para_217", "para_218", "para_219", "para_220", "para_221", "para_222", "para_223", "para_224" ] }, { "title": "FDIC’s claim seeking a prohibition order pursuant to 12", "paragraphs": [] }, { "title": "U.S.C. § 1818(e), we accept Bonan’s invitation to treat this as-", "paragraphs": [ "para_227", "para_228", "para_229" ] }, { "title": "Step two of Jarkesy’s Seventh Amendment framework em-", "paragraphs": [ "para_231", "para_232", "para_233" ] }, { "title": "Article III of the Constitution provides that “[t]he judicial", "paragraphs": [] }, { "title": "Power of the United States, shall be vested in one supreme", "paragraphs": [] }, { "title": "Court, and in such inferior Courts as the Congress may from", "paragraphs": [ "para_237", "para_238", "para_239", "para_240" ] }, { "title": "603 U.S. at 127 (cleaned up). As a result, the Supreme Court", "paragraphs": [ "para_242", "para_243", "para_244" ] }, { "title": "No. 24-3296 9", "paragraphs": [ "para_246", "para_247", "para_248" ] }, { "title": "The Supreme Court “has not definitively explained the", "paragraphs": [ "para_250" ] }, { "title": "(cleaned up); see also id. at 130 (acknowledging that “[t]his is", "paragraphs": [ "para_252", "para_253", "para_254", "para_255", "para_256", "para_257", "para_258" ] }, { "title": "Nordberg, 492 U.S. 33 (1989), and Atlas Roofing Co. v. Occupa-", "paragraphs": [ "para_260", "para_261" ] }, { "title": "F.4th 467, 473 (3d Cir. 2025) (observing that the Supreme", "paragraphs": [] }, { "title": "Court “resolved the public rights question in Jarkesy in a no-", "paragraphs": [ "para_264", "para_265", "para_266", "para_267", "para_268", "para_269", "para_270" ] }, { "title": "In Atlas Roofing, the Court announced a broad rule permit-", "paragraphs": [ "para_272", "para_273", "para_274", "para_275", "para_276" ] }, { "title": "10 No. 24-3296", "paragraphs": [ "para_278" ] }, { "title": "Atlas and the second company then petitioned for review in", "paragraphs": [ "para_280", "para_281", "para_282" ] }, { "title": "The Court disagreed and upheld the constitutionality of", "paragraphs": [ "para_284" ] }, { "title": "Congress creates new statutory ‘public rights,’” enforced by", "paragraphs": [ "para_286", "para_287", "para_288" ] }, { "title": "Court concluded that the adjudication at issue involved pub-", "paragraphs": [ "para_290", "para_291", "para_292", "para_293" ] }, { "title": "By its terms, Atlas Roofing recognized that Congress has", "paragraphs": [ "para_295", "para_296", "para_297", "para_298", "para_299", "para_300", "para_301", "para_302" ] }, { "title": "While Atlas Roofing remains good law, the Court has nar-", "paragraphs": [ "para_304", "para_305", "para_306" ] }, { "title": "Code involved private rights. See 492 U.S. at 55. Because", "paragraphs": [ "para_308" ] }, { "title": "No. 24-3296 11", "paragraphs": [ "para_310", "para_311" ] }, { "title": "Article III bankruptcy judge, the Court concluded that this", "paragraphs": [ "para_313", "para_314", "para_315", "para_316", "para_317" ] }, { "title": "The second narrowing came in Jarkesy, when the Court", "paragraphs": [ "para_319", "para_320", "para_321", "para_322" ] }, { "title": "SEC seeks civil penalties against him for [statutory] securities", "paragraphs": [ "para_324", "para_325", "para_326", "para_327", "para_328", "para_329", "para_330" ] }, { "title": "While the statutory fraud actions at issue in Jarkesy were", "paragraphs": [ "para_332", "para_333", "para_334", "para_335", "para_336", "para_337", "para_338", "para_339", "para_340" ] }, { "title": "12 No. 24-3296", "paragraphs": [] }, { "title": "But Jarkesy stopped short of overruling Atlas Roofing. To", "paragraphs": [ "para_343", "para_344", "para_345", "para_346", "para_347" ] }, { "title": "Roofing continues to govern the public rights inquiry for", "paragraphs": [ "para_349", "para_350" ] }, { "title": "137, while Jarkesy applies to “traditional legal claims” embed-", "paragraphs": [ "para_352" ] }, { "title": "When it comes to discerning whether a statutory claim", "paragraphs": [ "para_354", "para_355", "para_356", "para_357", "para_358", "para_359", "para_360", "para_361" ] }, { "title": "Jarkesy also explicitly relied on principles it derived from", "paragraphs": [ "para_363", "para_364", "para_365", "para_366", "para_367", "para_368" ] }, { "title": "To be sure, Jarkesy did not expressly tell us how its analysis", "paragraphs": [ "para_370", "para_371" ] }, { "title": "But our best answer based on the guidance we find in Jarkesy", "paragraphs": [] }, { "title": "No. 24-3296 13", "paragraphs": [ "para_374", "para_375" ] }, { "title": "Putting this all together, our task under Jarkesy’s second", "paragraphs": [ "para_377", "para_378", "para_379", "para_380", "para_381" ] }, { "title": "With this in mind, we consider the two statutory causes of", "paragraphs": [ "para_383" ] }, { "title": "Bonan. The Federal Deposit Insurance Act, as codified at 12", "paragraphs": [] }, { "title": "U.S.C. § 1818(i), permits the FDIC to impose a civil money", "paragraphs": [ "para_386", "para_387", "para_388", "para_389", "para_390" ] }, { "title": "FDIC to issue an order prohibiting a director from working at", "paragraphs": [ "para_392", "para_393", "para_394", "para_395", "para_396" ] }, { "title": "We begin with an “unsafe or unsound practice,” which", "paragraphs": [ "para_398", "para_399", "para_400", "para_401" ] }, { "title": "Holzman, Unsafe or Unsound Practices: Is the Current Judicial", "paragraphs": [ "para_403" ] }, { "title": "Banking L. 425, 429 n.21 (2000). Congress first used “unsafe or", "paragraphs": [] }, { "title": "14 No. 24-3296", "paragraphs": [ "para_406", "para_407", "para_408", "para_409", "para_410" ] }, { "title": "Wash. L. Rev. 175, 202 (1995). Congress has often left unsafe", "paragraphs": [ "para_412" ] }, { "title": "187–89, deliberately allowing the term to serve as a gap-filling", "paragraphs": [ "para_414", "para_415", "para_416", "para_417", "para_418" ] }, { "title": "7, 23–24 (1993) (describing the duty not to engage in unsafe", "paragraphs": [ "para_420", "para_421" ] }, { "title": "The most widespread working definition of an unsafe or", "paragraphs": [ "para_423" ] }, { "title": "FDIC relied upon in its action against Bonan, underscores the", "paragraphs": [ "para_425", "para_426", "para_427" ] }, { "title": "Generally speaking, an ‘unsafe or unsound", "paragraphs": [ "para_429", "para_430", "para_431", "para_432", "para_433", "para_434", "para_435" ] }, { "title": "No. 24-3296 15", "paragraphs": [] }, { "title": "Hearings on S. 3158 Before the House Comm. on Banking and", "paragraphs": [] }, { "title": "Currency, 89th Cong., 2d Sess. 49–50 (1966) (memorandum of", "paragraphs": [] }, { "title": "John Horne, Chairman of the Federal Home Loan Bank", "paragraphs": [] }, { "title": "Board); see also, e.g., Michael v. FDIC, 687 F.3d 337, 352 (7th", "paragraphs": [] }, { "title": "Cir. 2012) (using nearly identical language to describe an un-", "paragraphs": [ "para_442" ] }, { "title": "Matter of Seidman, 37 F.3d 911, 926–27 (3d Cir. 1994) (employ-", "paragraphs": [ "para_444" ] }, { "title": "Schooner, Fiduciary Duties’ Demanding Cousin, at 190 (“In", "paragraphs": [ "para_446", "para_447", "para_448" ] }, { "title": "As we see it, this definition addresses itself to actions that", "paragraphs": [ "para_450", "para_451", "para_452", "para_453", "para_454" ] }, { "title": "Founding that targets the same conduct or operates under", "paragraphs": [ "para_456" ] }, { "title": "So too with the other misconduct element underlying the", "paragraphs": [] }, { "title": "FDIC’s enforcement action against Bonan under §§ 1818(i) &", "paragraphs": [] }, { "title": "(e): breach of fiduciary duty. At a general level, fiduciary duty", "paragraphs": [ "para_460", "para_461" ] }, { "title": "L. J. 879, 880 (1988) (“As a legal principle, [fiduciary] obliga-", "paragraphs": [ "para_463", "para_464", "para_465", "para_466", "para_467" ] }, { "title": "16 No. 24-3296", "paragraphs": [] }, { "title": "Terry, 494 U.S. 558, 567 (1990) (observing that “action[s] by a", "paragraphs": [ "para_470", "para_471", "para_472", "para_473" ] }, { "title": "563 U.S. 421, 439 (2011) (explaining that “before the merger of", "paragraphs": [ "para_475", "para_476", "para_477" ] }, { "title": "(7th Cir. 1990) (“[E]nforcing fiduciary duties was equitable in", "paragraphs": [] }, { "title": "English practice ….”), rev’d on other grounds, 500 U.S. 90", "paragraphs": [] }, { "title": "(1991). We therefore do not see an action to enforce the breach", "paragraphs": [ "para_481", "para_482" ] }, { "title": "Focusing on the narrower context of banking, Bonan offers", "paragraphs": [ "para_484", "para_485", "para_486", "para_487" ] }, { "title": "(placing the first reported bank director liability cases in the", "paragraphs": [ "para_489", "para_490", "para_491", "para_492", "para_493", "para_494" ] }, { "title": "Bowerman v. Hamner, 250 U.S. 504, 511 (1919) (describing", "paragraphs": [] }, { "title": "Briggs v. Spaulding, 141 U.S. 132 (1891), as having offered “the", "paragraphs": [ "para_497", "para_498" ] }, { "title": "(“We recognize … that this Court did once articulate federal", "paragraphs": [] }, { "title": "No. 24-3296 17", "paragraphs": [ "para_501", "para_502" ] }, { "title": "So, by 1966, when Congress added breach of fiduciary", "paragraphs": [ "para_504", "para_505", "para_506", "para_507", "para_508", "para_509", "para_510", "para_511" ] }, { "title": "In our final analysis, then, we conclude that the FDIC’s en-", "paragraphs": [ "para_513", "para_514", "para_515", "para_516", "para_517", "para_518", "para_519" ] }, { "title": "III", "paragraphs": [] }, { "title": "We see Bonan’s Seventh Amendment claim as a close and", "paragraphs": [ "para_522", "para_523", "para_524", "para_525" ] }, { "title": "Recall that in Jarkesy the Supreme Court described public", "paragraphs": [ "para_527" ] }, { "title": "120. And, while acknowledging that the boundaries of the ex-", "paragraphs": [ "para_529", "para_530" ] }, { "title": "18 No. 24-3296", "paragraphs": [] }, { "title": "Article III court in the initial adjudication is necessary.” Id. at", "paragraphs": [] }, { "title": "128. Based on this description, it seems sensible to expect Ar-", "paragraphs": [ "para_534", "para_535" ] }, { "title": "This conclusion would suggest that the public rights ex-", "paragraphs": [ "para_537", "para_538", "para_539", "para_540" ] }, { "title": "Const. art. III, § 2. If the public rights exception attempts to", "paragraphs": [ "para_542", "para_543", "para_544", "para_545", "para_546", "para_547", "para_548", "para_549", "para_550" ] }, { "title": "And, indeed, the Supreme Court’s case law has suggested", "paragraphs": [ "para_552" ] }, { "title": "In Murray’s Lessee v. Hoboken Land & Improvement Co., the case", "paragraphs": [ "para_554" ] }, { "title": "Court adopted a definition of private rights that tracked more", "paragraphs": [ "para_556", "para_557", "para_558", "para_559", "para_560" ] }, { "title": "This statement of general principle from Murray’s Lessee", "paragraphs": [ "para_562" ] }, { "title": "No. 24-3296 19", "paragraphs": [] }, { "title": "See Jarkesy, 603 U.S. at 132 (referencing this precise language", "paragraphs": [ "para_565", "para_566", "para_567", "para_568" ] }, { "title": "(quoting N. Pipeline Const. Co. v. Marathon Pipe Line Co., 458", "paragraphs": [] }, { "title": "U.S. 50, 71 n.25 (1982) (plurality opinion by Brennan, J.)", "paragraphs": [] }, { "title": "(cleaned up))). The Supreme Court has even observed, albeit", "paragraphs": [ "para_572", "para_573", "para_574" ] }, { "title": "Loan Ins. Corp., 489 U.S. 561, 578–79 (1989) (cleaned up). All", "paragraphs": [ "para_576", "para_577", "para_578" ] }, { "title": "(e). See Intuit, Inc. v. FTC, 170 F.4th 411, 418 (5th Cir. 2026)", "paragraphs": [] }, { "title": "(concluding that traditional actions at both law and equity in-", "paragraphs": [ "para_581" ] }, { "title": "(suggesting the distinction between law and equity may have", "paragraphs": [ "para_583", "para_584" ] }, { "title": "But we hew closely to the Supreme Court’s most recent", "paragraphs": [ "para_586", "para_587", "para_588", "para_589", "para_590", "para_591", "para_592", "para_593", "para_594", "para_595" ] }, { "title": "20 No. 24-3296", "paragraphs": [ "para_597", "para_598", "para_599", "para_600", "para_601", "para_602", "para_603", "para_604" ] }, { "title": "As a lower federal court, our role is to follow the Supreme", "paragraphs": [ "para_606" ] }, { "title": "United States, 524 U.S. 236, 252–53 (1998) (“Our decisions re-", "paragraphs": [ "para_608", "para_609", "para_610", "para_611", "para_612", "para_613", "para_614", "para_615", "para_616" ] }, { "title": "IV", "paragraphs": [] }, { "title": "We turn next to Bonan’s other challenges to the FDIC’s en-", "paragraphs": [ "para_619" ] }, { "title": "A", "paragraphs": [] }, { "title": "Bonan first contends that the FDIC Board and the agency’s", "paragraphs": [ "para_622", "para_623", "para_624", "para_625", "para_626" ] }, { "title": "No. 24-3296 21", "paragraphs": [ "para_628", "para_629", "para_630", "para_631" ] }, { "title": "For its part, the FDIC does not defend the constitutionality", "paragraphs": [ "para_633", "para_634", "para_635", "para_636", "para_637", "para_638" ] }, { "title": "Five years ago, in Collins v. Yellen, the Supreme Court es-", "paragraphs": [ "para_640", "para_641" ] }, { "title": "220, 258 (2021). Unlike in an instance of improper appoint-", "paragraphs": [ "para_643", "para_644", "para_645", "para_646", "para_647", "para_648", "para_649" ] }, { "title": "To date, Collins has come to stand for the proposition that", "paragraphs": [ "para_651", "para_652", "para_653", "para_654", "para_655", "para_656", "para_657" ] }, { "title": "Hous. Fin. Agency, 15 F.4th 848, 853–54 (8th Cir. 2021);", "paragraphs": [] }, { "title": "22 No. 24-3296", "paragraphs": [ "para_660" ] }, { "title": "Inc. v. Consumer Prod. Safety Comm’n, 103 F.4th 748, 756–57", "paragraphs": [ "para_662", "para_663" ] }, { "title": "151 F.4th 761, 780 (5th Cir. 2025) (limiting Collins’s reach to", "paragraphs": [ "para_665", "para_666" ] }, { "title": "Collins itself went on to offer some guidance on when an", "paragraphs": [ "para_668", "para_669", "para_670", "para_671", "para_672" ] }, { "title": "President had made a public statement expressing displeas-", "paragraphs": [ "para_674", "para_675", "para_676", "para_677", "para_678", "para_679" ] }, { "title": "(“[H]e must demonstrate that the unconstitutional removal", "paragraphs": [ "para_681", "para_682" ] }, { "title": "(observing that courts have disagreed in the wake of Collins", "paragraphs": [ "para_684", "para_685", "para_686", "para_687" ] }, { "title": "Here, Bonan objects only to the restrictions on removal", "paragraphs": [ "para_689", "para_690" ] }, { "title": "No. 24-3296 23", "paragraphs": [ "para_692", "para_693", "para_694", "para_695", "para_696", "para_697", "para_698" ] }, { "title": "Change in Position by FDIC at 1, CBW Bank v. FDIC, No. 24-", "paragraphs": [ "para_700", "para_701", "para_702", "para_703", "para_704", "para_705", "para_706" ] }, { "title": "Bonan resists the application of Collins’s harm require-", "paragraphs": [ "para_708", "para_709" ] }, { "title": "Structural error cases contain “defect[s] affecting the frame-", "paragraphs": [ "para_711", "para_712" ] }, { "title": "279, 310 (1991). If an error is structural, it mandates automatic", "paragraphs": [ "para_714", "para_715", "para_716", "para_717", "para_718", "para_719", "para_720" ] }, { "title": "The reasoning of Collins counsels against classifying an", "paragraphs": [ "para_722" ] }, { "title": "24 No. 24-3296", "paragraphs": [] }, { "title": "Supreme Court held that we need not void or undo every ac-", "paragraphs": [ "para_725" ] }, { "title": "Collins, 594 U.S. at 259 (“We therefore see no reason to hold", "paragraphs": [ "para_727" ] }, { "title": "This is a far cry from an error that “will always render a trial", "paragraphs": [ "para_729", "para_730", "para_731", "para_732", "para_733", "para_734" ] }, { "title": "Bonan has given us no reason to conclude that the FDIC’s", "paragraphs": [ "para_736", "para_737" ] }, { "title": "And several circuits have applied Collins’s harm requirement", "paragraphs": [ "para_739", "para_740", "para_741" ] }, { "title": "(same for Federal Aviation Administration enforcement pro-", "paragraphs": [ "para_743" ] }, { "title": "Product Safety Commission enforcement proceedings); Kauf-", "paragraphs": [ "para_745", "para_746", "para_747", "para_748" ] }, { "title": "B", "paragraphs": [] }, { "title": "We can make quick work of Bonan’s three proffered bases", "paragraphs": [ "para_751", "para_752" ] }, { "title": "No. 24-3296 25", "paragraphs": [] }, { "title": "Bonan first suggests that the FDIC impermissibly served", "paragraphs": [ "para_755", "para_756", "para_757", "para_758", "para_759" ] }, { "title": "450 (7th Cir. 2025) (cleaned up), but “the standard for proving", "paragraphs": [ "para_761", "para_762", "para_763" ] }, { "title": "35, 47 (1975). Bonan can overcome this presumption only by", "paragraphs": [ "para_765", "para_766", "para_767", "para_768", "para_769", "para_770", "para_771", "para_772", "para_773", "para_774", "para_775" ] }, { "title": "Withrow. When he does attempt to demonstrate actual bias in", "paragraphs": [ "para_777", "para_778", "para_779", "para_780", "para_781" ] }, { "title": "Bonan next urges that his inability to take depositions", "paragraphs": [ "para_783", "para_784" ] }, { "title": "26 No. 24-3296", "paragraphs": [ "para_786" ] }, { "title": "(7th Cir. 2000). Rather, “discovery must be granted if in the", "paragraphs": [ "para_788", "para_789", "para_790" ] }, { "title": "Bonan fails to demonstrate that his lack of access to pre-", "paragraphs": [ "para_792", "para_793", "para_794", "para_795", "para_796", "para_797", "para_798", "para_799" ] }, { "title": "FDIC had greater access to pretrial discovery does not rise to", "paragraphs": [ "para_801" ] }, { "title": "Finally, Bonan contends that the FDIC failed to properly", "paragraphs": [ "para_803", "para_804", "para_805", "para_806", "para_807" ] }, { "title": "FDIC ALJ’s findings] within the time prescribed is deemed a", "paragraphs": [ "para_809" ] }, { "title": "1120, 1125 (7th Cir. 2023) (observing that “[f]ailure to chal-", "paragraphs": [ "para_811", "para_812", "para_813", "para_814" ] }, { "title": "No. 24-3296 27", "paragraphs": [] }, { "title": "C", "paragraphs": [] }, { "title": "This brings us to Bonan’s final set of challenges to the", "paragraphs": [] }, { "title": "FDIC’s action against him. He asserts that, as a substantive", "paragraphs": [ "para_819", "para_820", "para_821" ] }, { "title": "On this front our review of the agency’s action is deferen-", "paragraphs": [ "para_823", "para_824", "para_825" ] }, { "title": "Board’s findings only if unsupported by substantial evidence", "paragraphs": [ "para_827", "para_828", "para_829", "para_830", "para_831", "para_832" ] }, { "title": "The FDIC Board “abuses its discretion only when it imposes", "paragraphs": [ "para_834", "para_835" ] }, { "title": "1. The Prohibition Order", "paragraphs": [] }, { "title": "To impose a prohibition order under § 1818(e)(1), perma-", "paragraphs": [ "para_838", "para_839", "para_840", "para_841" ] }, { "title": "Landry v. FDIC, 204 F.3d 1125, 1138 (D.C. Cir. 2000). The FDIC", "paragraphs": [] }, { "title": "Board concluded that Bonan’s role in Grand Rivers’s loan to", "paragraphs": [] }, { "title": "618 Holdings satisfied this statutory standard. The", "paragraphs": [] }, { "title": "28 No. 24-3296", "paragraphs": [ "para_846", "para_847" ] }, { "title": "On the “misconduct” prong, the FDIC had to show that", "paragraphs": [ "para_849", "para_850", "para_851", "para_852", "para_853", "para_854" ] }, { "title": "The FDIC Board found that Bonan had engaged in unsafe", "paragraphs": [ "para_856", "para_857", "para_858", "para_859", "para_860" ] }, { "title": "Grand Rivers. See Michael, 687 F.3d at 352 (defining “unsafe", "paragraphs": [ "para_862", "para_863" ] }, { "title": "As a pure legal matter, Bonan may have a point. See Cal-", "paragraphs": [ "para_865", "para_866", "para_867", "para_868" ] }, { "title": "OTS, 81 F.3d 195, 204 (D.C. Cir. 1996) (observing that “the", "paragraphs": [ "para_870", "para_871", "para_872", "para_873", "para_874", "para_875", "para_876" ] }, { "title": "No. 24-3296 29", "paragraphs": [ "para_878" ] }, { "title": "(observing that it suffices under § 1818(e)(1)(A) if the court", "paragraphs": [ "para_880", "para_881", "para_882" ] }, { "title": "Our prior decision in Michael supplies guidance on what it", "paragraphs": [ "para_884" ] }, { "title": "Federal Deposit Insurance Act. At a foundational level, we", "paragraphs": [ "para_886", "para_887", "para_888", "para_889", "para_890", "para_891", "para_892", "para_893", "para_894", "para_895" ] }, { "title": "57 (Murphy, J., dissenting) (describing positions on both", "paragraphs": [ "para_897", "para_898" ] }, { "title": "The FDIC Board relied on federal law to define Bonan’s", "paragraphs": [ "para_900" ] }, { "title": "Board’s conclusion that Bonan’s conduct leading up to Grand", "paragraphs": [] }, { "title": "Rivers’s loan to 618 Holdings breached his fiduciary duty of", "paragraphs": [ "para_903" ] }, { "title": "Directors and officers owe a duty of care to their bank. See", "paragraphs": [] }, { "title": "Seidman, 37 F.3d at 933 (quoting the Revised Model Business", "paragraphs": [] }, { "title": "Corporation Act § 8.42). This duty required Bonan to act", "paragraphs": [ "para_907", "para_908" ] }, { "title": "30 No. 24-3296", "paragraphs": [ "para_910", "para_911", "para_912", "para_913", "para_914", "para_915" ] }, { "title": "Bonan begs to differ, telling us that he had sound business", "paragraphs": [ "para_917", "para_918" ] }, { "title": "Evergreen with cash needed to stay in business while the oil", "paragraphs": [ "para_920" ] }, { "title": "Board’s conclusion that this argument is not compelling in the", "paragraphs": [ "para_922" ] }, { "title": "Put another way, Bonan cannot explain why his ostensible", "paragraphs": [ "para_924", "para_925" ] }, { "title": "Indeed, Bonan all but invites a complete abandonment of the", "paragraphs": [ "para_927", "para_928" ] }, { "title": "In the next step of its analysis, the FDIC Board found that", "paragraphs": [] }, { "title": "Bonan’s misconduct satisfied the “effects” prong of", "paragraphs": [ "para_931", "para_932", "para_933", "para_934", "para_935" ] }, { "title": "Grand Rivers. As a result, by the time of the FDIC’s adminis-", "paragraphs": [ "para_937", "para_938", "para_939" ] }, { "title": "No. 24-3296 31", "paragraphs": [] }, { "title": "Bonan does not dispute these facts or financial conse-", "paragraphs": [ "para_942", "para_943", "para_944", "para_945", "para_946", "para_947", "para_948", "para_949", "para_950", "para_951", "para_952" ] }, { "title": "Finally, as to the “culpability” prong of § 1818(e)(1), the", "paragraphs": [] }, { "title": "FDIC Board found that Bonan had exhibited “willful … dis-", "paragraphs": [ "para_955" ] }, { "title": "U.S.C. § 1818(e)(1)(C)(ii). “Willful disregard is deliberate con-", "paragraphs": [ "para_957", "para_958" ] }, { "title": "352 (cleaned up). Here, too, ample evidence supports the", "paragraphs": [] }, { "title": "Board’s finding that Bonan’s involvement in the 618 Holdings", "paragraphs": [ "para_961", "para_962", "para_963", "para_964" ] }, { "title": "Grand Rivers’s loan was funding both 618 Holdings’s pur-", "paragraphs": [ "para_966", "para_967" ] }, { "title": "Grand Rivers in this position exposed the bank to an abnor-", "paragraphs": [ "para_969", "para_970", "para_971" ] }, { "title": "32 No. 24-3296", "paragraphs": [] }, { "title": "2. Civil Money Penalty", "paragraphs": [] }, { "title": "We come last to the Board’s conclusion that Bonan’s ac-", "paragraphs": [ "para_975", "para_976" ] }, { "title": "U.S.C. § 1818(i)(2)(B) largely track those governing the FDIC’s", "paragraphs": [ "para_978", "para_979", "para_980", "para_981", "para_982", "para_983", "para_984" ] }, { "title": "Our analysis of the prohibition order resolves and dis-", "paragraphs": [ "para_986", "para_987", "para_988", "para_989", "para_990", "para_991", "para_992", "para_993", "para_994", "para_995", "para_996" ] }, { "title": "Board that the defendants’ complicity “in any one of these", "paragraphs": [ "para_998", "para_999", "para_1000" ] } ], "paragraphs": [ { "text": "In the", "paragraph_id": "para_1" }, { "text": "United States Court of Appeals", "paragraph_id": "para_2" }, { "text": "For the Seventh Circuit", "paragraph_id": "para_3" }, { "text": "____________________", "paragraph_id": "para_4" }, { "text": "No. 24-3296", "paragraph_id": "para_5" }, { "text": "FRANK WILLIAM BONAN, II, individually and as an institu-", "paragraph_id": "para_6" }, { "text": "tion-affiliated party of GRAND RIVERS COMMUNITY BANK,", "paragraph_id": "para_7" }, { "text": "GRAND CHAIN, ILLINOIS (INSURED STATE NONMEMBER BANK),", "paragraph_id": "para_8" }, { "text": "Petitioner,", "paragraph_id": "para_9" }, { "text": "v.", "paragraph_id": "para_10" }, { "text": "FEDERAL DEPOSIT INSURANCE CORPORATION,", "paragraph_id": "para_11" }, { "text": "Respondent.", "paragraph_id": "para_12" }, { "text": "____________________", "paragraph_id": "para_13" }, { "text": "Petition for Review of", "paragraph_id": "para_14" }, { "text": "an Order of the Federal Deposit Insurance Corporation.", "paragraph_id": "para_15" }, { "text": "Nos. FDIC-16-0254e & FDIC-16-0256k.", "paragraph_id": "para_16" }, { "text": "____________________", "paragraph_id": "para_17" }, { "text": "ARGUED SEPTEMBER 3, 2025 — DECIDED AUGUST 12, 2026", "paragraph_id": "para_18" }, { "text": "____________________", "paragraph_id": "para_19" }, { "text": "Before SCUDDER, KIRSCH, and PRYOR, Circuit Judges.", "paragraph_id": "para_20" }, { "text": "SCUDDER, Circuit Judge. Frank William Bonan II was a", "paragraph_id": "para_21" }, { "text": "banker in Illinois. In 2021, the Federal Deposit Insurance Cor-", "paragraph_id": "para_22" }, { "text": "poration commenced an administrative enforcement action", "paragraph_id": "para_23" }, { "text": "against him related to misconduct at Grand Rivers Commu-", "paragraph_id": "para_24" }, { "text": "nity Bank. During the administrative proceedings, the FDIC’s", "paragraph_id": "para_25" }, { "text": "Board of Directors found that Bonan had engaged in unsafe", "paragraph_id": "para_26" }, { "text": "2 No. 24-3296", "paragraph_id": "para_27" }, { "text": "or unsound banking practices and breached his fiduciary du-", "paragraph_id": "para_28" }, { "text": "ties to Grand Rivers. It then imposed an order pursuant to 12", "paragraph_id": "para_29" }, { "text": "U.S.C. § 1818(e) prohibiting Bonan from working at any", "paragraph_id": "para_30" }, { "text": "FDIC-insured institution and assessed a $105,000 civil money", "paragraph_id": "para_31" }, { "text": "penalty pursuant to 12 U.S.C. § 1818(i)(2)(B). In his petition", "paragraph_id": "para_32" }, { "text": "for review, Bonan urges us to reverse the FDIC’s decision and", "paragraph_id": "para_33" }, { "text": "vacate its orders, primarily contending that the administra-", "paragraph_id": "para_34" }, { "text": "tive adjudication violated his jury trial right under the Sev-", "paragraph_id": "para_35" }, { "text": "enth Amendment. While Bonan’s Seventh Amendment claim", "paragraph_id": "para_36" }, { "text": "presents a close question, we ultimately find no violation un-", "paragraph_id": "para_37" }, { "text": "der the law as it stands today. As for Bonan’s other challenges", "paragraph_id": "para_38" }, { "text": "to the FDIC’s administrative enforcement action, we see no", "paragraph_id": "para_39" }, { "text": "compelling ground for relief. In the end, then, we deny the", "paragraph_id": "para_40" }, { "text": "petition for review.", "paragraph_id": "para_41" }, { "text": "I", "paragraph_id": "para_42" }, { "text": "A", "paragraph_id": "para_43" }, { "text": "Frank Bonan served as chairman of the Board of Directors", "paragraph_id": "para_44" }, { "text": "of Grand Rivers Community Bank. He also sat on the Bank’s", "paragraph_id": "para_45" }, { "text": "loan committee. By all accounts, Bonan managed Grand Riv-", "paragraph_id": "para_46" }, { "text": "ers with an iron fist, acting as the dominant and uncompro-", "paragraph_id": "para_47" }, { "text": "mising decisionmaker. Grand Rivers is a federally insured de-", "paragraph_id": "para_48" }, { "text": "pository institution under the Federal Deposit Insurance Act.", "paragraph_id": "para_49" }, { "text": "Bonan simultaneously held meaningful roles at People’s Na-", "paragraph_id": "para_50" }, { "text": "tional Bank in McLeansboro, Illinois. Beyond serving as pres-", "paragraph_id": "para_51" }, { "text": "ident for PNB’s southern region, Bonan had positions on the", "paragraph_id": "para_52" }, { "text": "institution’s Board of Directors and Executive Loan Commit-", "paragraph_id": "para_53" }, { "text": "tee.", "paragraph_id": "para_54" }, { "text": "The key events underlying the FDIC’s enforcement action", "paragraph_id": "para_55" }, { "text": "began in 2015. At the heart of it are Evergreen Drilling and", "paragraph_id": "para_56" }, { "text": "Evergreen Properties (and related borrowers), which", "paragraph_id": "para_57" }, { "text": "No. 24-3296 3", "paragraph_id": "para_58" }, { "text": "operated an oil-drilling business based in Carmi, Illinois. Ev-", "paragraph_id": "para_59" }, { "text": "ergreen had outstanding secured loans with both Grand Riv-", "paragraph_id": "para_60" }, { "text": "ers and PNB, and Bonan managed the Evergreen loan rela-", "paragraph_id": "para_61" }, { "text": "tionship for both banks. The FDIC’s enforcement action fo-", "paragraph_id": "para_62" }, { "text": "cused on Bonan’s involvement in two matters arising from", "paragraph_id": "para_63" }, { "text": "Grand Rivers’s financial relationship with Evergreen.", "paragraph_id": "para_64" }, { "text": "1. The 618 Holdings Loan", "paragraph_id": "para_65" }, { "text": "In 2015, the oil-drilling industry faced a severe downturn.", "paragraph_id": "para_66" }, { "text": "Evergreen, in turn, confronted financial difficulties, prompt-", "paragraph_id": "para_67" }, { "text": "ing concern from Bonan and others at PNB that the company", "paragraph_id": "para_68" }, { "text": "would not be able to service its debt. In September 2015, Bo-", "paragraph_id": "para_69" }, { "text": "nan prepared a “Plan for Evergreen” that proposed the com-", "paragraph_id": "para_70" }, { "text": "pany sell collateral and refinance its debt to pay down its", "paragraph_id": "para_71" }, { "text": "loans from PNB and Grand Rivers.", "paragraph_id": "para_72" }, { "text": "One piece of Bonan’s plan centered on a local commercial", "paragraph_id": "para_73" }, { "text": "warehouse that served as Evergreen’s headquarters. In the", "paragraph_id": "para_74" }, { "text": "fall of 2015, there were two liens on the warehouse, one secur-", "paragraph_id": "para_75" }, { "text": "ing PNB’s $358,000 first mortgage and another securing", "paragraph_id": "para_76" }, { "text": "Grand Rivers’s $638,000 second mortgage. Bonan contem-", "paragraph_id": "para_77" }, { "text": "plated that Evergreen would engage in a sale and leaseback", "paragraph_id": "para_78" }, { "text": "transaction through which the company would sell its ware-", "paragraph_id": "para_79" }, { "text": "house, use the proceeds to pay down its loans, and then con-", "paragraph_id": "para_80" }, { "text": "tinue to use the warehouse under a new lease.", "paragraph_id": "para_81" }, { "text": "While Bonan originally envisioned that his personal com-", "paragraph_id": "para_82" }, { "text": "pany would purchase the Evergreen warehouse, he ulti-", "paragraph_id": "para_83" }, { "text": "mately found two other buyers: James Harbison and Adam", "paragraph_id": "para_84" }, { "text": "Tate. In December 2015, Bonan asked them to purchase the", "paragraph_id": "para_85" }, { "text": "warehouse with financing from Grand Rivers. At the time,", "paragraph_id": "para_86" }, { "text": "both Harbison and Tate personally worked for Bonan and", "paragraph_id": "para_87" }, { "text": "lived rent free in housing that Bonan owned. Neither was", "paragraph_id": "para_88" }, { "text": "4 No. 24-3296", "paragraph_id": "para_89" }, { "text": "financially stable: Harbison had negative net worth of", "paragraph_id": "para_90" }, { "text": "$190,000 and earned $62,000 annually, and Tate’s net worth", "paragraph_id": "para_91" }, { "text": "was $20,000 with annual earnings of $27,000.", "paragraph_id": "para_92" }, { "text": "On or before December 17, 2015, Bonan directed Grand", "paragraph_id": "para_93" }, { "text": "Rivers’s Chief Financial Officer to prepare a loan request on", "paragraph_id": "para_94" }, { "text": "behalf of Harbison and Tate. The request stated that the loan", "paragraph_id": "para_95" }, { "text": "was to purchase the warehouse from Evergreen for $1.25 mil-", "paragraph_id": "para_96" }, { "text": "lion and came in the name of 618 Holdings, LLC—an entity", "paragraph_id": "para_97" }, { "text": "not legally formed until December 30, 2015.", "paragraph_id": "para_98" }, { "text": "On December 23, the Grand Rivers Board of Directors", "paragraph_id": "para_99" }, { "text": "voted to approve the $1.25 million loan to 618 Holdings, an", "paragraph_id": "para_100" }, { "text": "entity that still did not exist. The votes were three in favor,", "paragraph_id": "para_101" }, { "text": "none opposed, and two abstaining. Bonan initially voted in", "paragraph_id": "para_102" }, { "text": "favor but ultimately abstained. Grand Rivers’s Chief Finan-", "paragraph_id": "para_103" }, { "text": "cial Officer, who voted in favor of the loan, later testified that", "paragraph_id": "para_104" }, { "text": "he did so at Bonan’s direction, fearing he would lose his job if", "paragraph_id": "para_105" }, { "text": "he voted no and crossed Bonan.", "paragraph_id": "para_106" }, { "text": "Several aspects of the resulting transaction bear emphasis.", "paragraph_id": "para_107" }, { "text": "The final loan from Grand Rivers to 618 Holdings was for", "paragraph_id": "para_108" }, { "text": "$1,262,109.75 and required a monthly payment of $7,752.94", "paragraph_id": "para_109" }, { "text": "(totaling $93,035.28 per year). The amount due annually ex-", "paragraph_id": "para_110" }, { "text": "ceeded the combined incomes of Harbison and Tate ($89,000).", "paragraph_id": "para_111" }, { "text": "Additionally, 618 Holdings used this loan to purchase the", "paragraph_id": "para_112" }, { "text": "warehouse, which it then leased back to Evergreen. The loan", "paragraph_id": "para_113" }, { "text": "proceeds paid off the debts secured by PNB’s and Grand Riv-", "paragraph_id": "para_114" }, { "text": "ers’s liens on the warehouse. The deal also placed $150,000 of", "paragraph_id": "para_115" }, { "text": "the remaining proceeds into an escrow account to be automat-", "paragraph_id": "para_116" }, { "text": "ically applied for the first 18 months of Evergreen’s lease pay-", "paragraph_id": "para_117" }, { "text": "ments to 618 Holdings.", "paragraph_id": "para_118" }, { "text": "No. 24-3296 5", "paragraph_id": "para_119" }, { "text": "What all of this means is that Grand Rivers’s loan funded", "paragraph_id": "para_120" }, { "text": "both the purchase of the warehouse and Evergreen’s initial", "paragraph_id": "para_121" }, { "text": "ability to make lease payments, which, in turn, supplied 618", "paragraph_id": "para_122" }, { "text": "Holdings with money to repay the loan. Grand Rivers’s Chief", "paragraph_id": "para_123" }, { "text": "Financial Officer testified that he structured the transaction", "paragraph_id": "para_124" }, { "text": "this way at Bonan’s instruction. Overall, the terms of purchase", "paragraph_id": "para_125" }, { "text": "and the lease agreement were nearly identical to those that", "paragraph_id": "para_126" }, { "text": "Bonan had negotiated when contemplating the purchase him-", "paragraph_id": "para_127" }, { "text": "self.", "paragraph_id": "para_128" }, { "text": "In January 2016, two FDIC examiners reviewed the 618", "paragraph_id": "para_129" }, { "text": "Holdings loan. They classified it as substandard “due to the", "paragraph_id": "para_130" }, { "text": "lack of financial capacity of the debtors, the inappropriate", "paragraph_id": "para_131" }, { "text": "structuring of the 618 Holdings credit in which an indirect", "paragraph_id": "para_132" }, { "text": "[principal and interest] reserve account was established to", "paragraph_id": "para_133" }, { "text": "make loan payments, the lack of collateral protection, and the", "paragraph_id": "para_134" }, { "text": "questionable ability of Evergreen Properties to generate suffi-", "paragraph_id": "para_135" }, { "text": "cient income to pay lease payments.”", "paragraph_id": "para_136" }, { "text": "In April 2016, Grand Rivers placed the 618 Holdings loan", "paragraph_id": "para_137" }, { "text": "on non-accrual status. In January 2017, Grand Rivers charged", "paragraph_id": "para_138" }, { "text": "off $500,000 from the loan, effectively deeming that amount", "paragraph_id": "para_139" }, { "text": "uncollectible. 618 Holdings then defaulted on the loan, enter-", "paragraph_id": "para_140" }, { "text": "ing into a deed-in-lieu of foreclosure with Grand Rivers. At", "paragraph_id": "para_141" }, { "text": "the time of the FDIC’s administrative proceedings, Grand", "paragraph_id": "para_142" }, { "text": "Rivers still held title to the Evergreen warehouse.", "paragraph_id": "para_143" }, { "text": "2. The Release of the Rig 23 Collateral", "paragraph_id": "para_144" }, { "text": "The second event involves a series of errors related to an-", "paragraph_id": "para_145" }, { "text": "other piece of Evergreen’s collateral securing a separate loan", "paragraph_id": "para_146" }, { "text": "from Grand Rivers. In November 2015, officers at Grand Riv-", "paragraph_id": "para_147" }, { "text": "ers mistakenly released the Bank’s purchase money security", "paragraph_id": "para_148" }, { "text": "interest in Rig 23, an oil-drilling rig that Evergreen owned.", "paragraph_id": "para_149" }, { "text": "6 No. 24-3296", "paragraph_id": "para_150" }, { "text": "The mistake occurred in conjunction with Evergreen’s sale of", "paragraph_id": "para_151" }, { "text": "Rig 24, a less valuable oil drilling rig in which Grand Rivers", "paragraph_id": "para_152" }, { "text": "never had a security interest. When Grand Rivers discovered", "paragraph_id": "para_153" }, { "text": "the erroneous release in early 2016, it took a lower priority", "paragraph_id": "para_154" }, { "text": "blanket lien in Evergreen’s assets, now subordinate to PNB’s", "paragraph_id": "para_155" }, { "text": "interest. In January 2017, Grand Rivers charged off $489,268", "paragraph_id": "para_156" }, { "text": "from its Evergreen loan originally secured by Rig 23.", "paragraph_id": "para_157" }, { "text": "B", "paragraph_id": "para_158" }, { "text": "In May 2021, the FDIC initiated an administrative enforce-", "paragraph_id": "para_159" }, { "text": "ment action against Bonan. Based on his role in the 618 Hold-", "paragraph_id": "para_160" }, { "text": "ings loan and the release of Rig 23, the agency alleged that", "paragraph_id": "para_161" }, { "text": "Bonan had engaged in unsafe or unsound banking practices", "paragraph_id": "para_162" }, { "text": "and breached his fiduciary duties to Grand Rivers. The Notice", "paragraph_id": "para_163" }, { "text": "of Charges sought an order prohibiting Bonan from working", "paragraph_id": "para_164" }, { "text": "at federally insured banks (12 U.S.C. § 1818(e)) as well as a", "paragraph_id": "para_165" }, { "text": "civil money penalty (12 U.S.C. § 1818(i)).", "paragraph_id": "para_166" }, { "text": "In January 2023, an FDIC administrative law judge con-", "paragraph_id": "para_167" }, { "text": "ducted a six-day hearing, at which Bonan testified and cross-", "paragraph_id": "para_168" }, { "text": "examined other witnesses. In November 2023, the ALJ issued", "paragraph_id": "para_169" }, { "text": "a recommended decision, concluding that Bonan engaged in", "paragraph_id": "para_170" }, { "text": "professional misconduct that merited both sanctions. For his", "paragraph_id": "para_171" }, { "text": "part, Bonan disagreed and filed exceptions to the recom-", "paragraph_id": "para_172" }, { "text": "mended decision.", "paragraph_id": "para_173" }, { "text": "In December 2024, the FDIC Board issued its decision and", "paragraph_id": "para_174" }, { "text": "orders. The Board found that Bonan’s misconduct in pushing", "paragraph_id": "para_175" }, { "text": "through the financially unsound 618 Holdings loan satisfied", "paragraph_id": "para_176" }, { "text": "the requirements for a prohibition order under § 1818(e).", "paragraph_id": "para_177" }, { "text": "And, based on similar reasoning, the Board also found that", "paragraph_id": "para_178" }, { "text": "Bonan’s involvement in the 618 Holdings loan merited a sec-", "paragraph_id": "para_179" }, { "text": "ond tier civil money penalty under § 1818(i)(2)(B) in the", "paragraph_id": "para_180" }, { "text": "No. 24-3296 7", "paragraph_id": "para_181" }, { "text": "amount of $105,000. Finally, the Board determined that Bo-", "paragraph_id": "para_182" }, { "text": "nan’s misconduct related to the Rig 23 release, which largely", "paragraph_id": "para_183" }, { "text": "involved pressuring his subordinates into making a mistake,", "paragraph_id": "para_184" }, { "text": "also supported a $105,000 civil money penalty.", "paragraph_id": "para_185" }, { "text": "Bonan then petitioned for our review. See 12 U.S.C.", "paragraph_id": "para_186" }, { "text": "§ 1818(h)(2). He raises five challenges to the FDIC’s enforce-", "paragraph_id": "para_187" }, { "text": "ment action and orders. The first three are constitutional", "paragraph_id": "para_188" }, { "text": "claims, while the fourth and fifth dispute the FDIC’s decision", "paragraph_id": "para_189" }, { "text": "and penalties on mainly evidentiary grounds.", "paragraph_id": "para_190" }, { "text": "II", "paragraph_id": "para_191" }, { "text": "We begin with Bonan’s contention that the FDIC’s in-", "paragraph_id": "para_192" }, { "text": "house adjudication of its enforcement action based on", "paragraph_id": "para_193" }, { "text": "§§ 1818(i) & (e) violated his Seventh Amendment right to a", "paragraph_id": "para_194" }, { "text": "jury.", "paragraph_id": "para_195" }, { "text": "The Seventh Amendment provides that “[i]n Suits at com-", "paragraph_id": "para_196" }, { "text": "mon law, … the right of trial by jury shall be preserved.” U.S.", "paragraph_id": "para_197" }, { "text": "Const. amend. VII. In SEC v. Jarkesy, the Supreme Court es-", "paragraph_id": "para_198" }, { "text": "tablished a two-step framework for applying this constitu-", "paragraph_id": "para_199" }, { "text": "tional guarantee in the context of administrative enforcement", "paragraph_id": "para_200" }, { "text": "proceedings. 603 U.S. 109 (2024). First, we ask the “threshold”", "paragraph_id": "para_201" }, { "text": "question whether the administrative action “implicates the", "paragraph_id": "para_202" }, { "text": "Seventh Amendment.” Id. at 120. If the answer at the first step", "paragraph_id": "para_203" }, { "text": "is yes, we “next consider whether the ‘public rights’ exception", "paragraph_id": "para_204" }, { "text": "to Article III jurisdiction applies.” Id. When the public rights", "paragraph_id": "para_205" }, { "text": "exception applies, “Congress may assign the matter for deci-", "paragraph_id": "para_206" }, { "text": "sion to an agency without a jury, consistent with the Seventh", "paragraph_id": "para_207" }, { "text": "Amendment.” Id. at 127.", "paragraph_id": "para_208" }, { "text": "The first step is straightforward here. The Seventh", "paragraph_id": "para_209" }, { "text": "Amendment, the Court has explained, extends to statutory", "paragraph_id": "para_210" }, { "text": "claims if they are “legal in nature.” Id. at 122 (cleaned up). To", "paragraph_id": "para_211" }, { "text": "8 No. 24-3296", "paragraph_id": "para_212" }, { "text": "make this determination, we examine both “the cause of ac-", "paragraph_id": "para_213" }, { "text": "tion and the remedy it provides,” giving more weight to the", "paragraph_id": "para_214" }, { "text": "nature of the remedy. Id. at 122–23; see also Tull v. United", "paragraph_id": "para_215" }, { "text": "States, 481 U.S. 412, 421 (1987) (“[T]he relief sought is more", "paragraph_id": "para_216" }, { "text": "important than finding a precisely analogous common-law", "paragraph_id": "para_217" }, { "text": "cause of action in determining whether the Seventh Amend-", "paragraph_id": "para_218" }, { "text": "ment guarantees a jury trial.” (cleaned up)). The FDIC", "paragraph_id": "para_219" }, { "text": "acknowledges that the civil money penalty it imposed on Bo-", "paragraph_id": "para_220" }, { "text": "nan pursuant to 12 U.S.C. § 1818(i) is “the prototypical com-", "paragraph_id": "para_221" }, { "text": "mon law remedy,” Jarkesy, 603 U.S. at 123, and it therefore", "paragraph_id": "para_222" }, { "text": "does not contest that this aspect of its administrative enforce-", "paragraph_id": "para_223" }, { "text": "ment action implicated the Seventh Amendment. As for the", "paragraph_id": "para_224" }, { "text": "FDIC’s claim seeking a prohibition order pursuant to 12", "paragraph_id": "para_225" }, { "text": "U.S.C. § 1818(e), we accept Bonan’s invitation to treat this as-", "paragraph_id": "para_226" }, { "text": "pect of the agency’s enforcement action as legal in nature—a", "paragraph_id": "para_227" }, { "text": "point the FDIC does not dispute. So we proceed to Jarkesy’s", "paragraph_id": "para_228" }, { "text": "next step for both claims.", "paragraph_id": "para_229" }, { "text": "Step two of Jarkesy’s Seventh Amendment framework em-", "paragraph_id": "para_230" }, { "text": "beds a notorious thicket in the law: the public rights exception", "paragraph_id": "para_231" }, { "text": "to Article III jurisdiction. At a high level, this doctrine roots", "paragraph_id": "para_232" }, { "text": "itself in the principle of separation of powers. See id. at 127.", "paragraph_id": "para_233" }, { "text": "Article III of the Constitution provides that “[t]he judicial", "paragraph_id": "para_234" }, { "text": "Power of the United States, shall be vested in one supreme", "paragraph_id": "para_235" }, { "text": "Court, and in such inferior Courts as the Congress may from", "paragraph_id": "para_236" }, { "text": "time to time ordain and establish.” U.S. Const. art. III, § 1.", "paragraph_id": "para_237" }, { "text": "“Under the basic concept of separation of powers that flows", "paragraph_id": "para_238" }, { "text": "from the scheme of a tripartite government,” this judicial", "paragraph_id": "para_239" }, { "text": "power “cannot be shared with the other branches.” Jarkesy,", "paragraph_id": "para_240" }, { "text": "603 U.S. at 127 (cleaned up). As a result, the Supreme Court", "paragraph_id": "para_241" }, { "text": "has understood Article III’s vesting of judicial power to re-", "paragraph_id": "para_242" }, { "text": "quire that “matters concerning private rights … not be re-", "paragraph_id": "para_243" }, { "text": "moved from Article III courts.” Id. At the same time, the Court", "paragraph_id": "para_244" }, { "text": "No. 24-3296 9", "paragraph_id": "para_245" }, { "text": "has recognized “a class of cases” concerning “public rights,”", "paragraph_id": "para_246" }, { "text": "where “no involvement by an Article III court in the initial", "paragraph_id": "para_247" }, { "text": "adjudication is necessary.” Id. at 128.", "paragraph_id": "para_248" }, { "text": "The Supreme Court “has not definitively explained the", "paragraph_id": "para_249" }, { "text": "distinction between public and private rights.” Id. at 131", "paragraph_id": "para_250" }, { "text": "(cleaned up); see also id. at 130 (acknowledging that “[t]his is", "paragraph_id": "para_251" }, { "text": "an area of frequently arcane distinctions and confusing prec-", "paragraph_id": "para_252" }, { "text": "edents” (cleaned up)). In Jarkesy, the Court suggested that", "paragraph_id": "para_253" }, { "text": "cases involving public rights fall into a set of “historic catego-", "paragraph_id": "para_254" }, { "text": "ries of adjudications.” Id. at 130. But the Court did not over-", "paragraph_id": "para_255" }, { "text": "rule, and indeed relied on, a separate line of precedent apply-", "paragraph_id": "para_256" }, { "text": "ing the public rights exception to the adjudication of statutory", "paragraph_id": "para_257" }, { "text": "claims. See id. at 132–40 (discussing Granfinanciera, S.A. v.", "paragraph_id": "para_258" }, { "text": "Nordberg, 492 U.S. 33 (1989), and Atlas Roofing Co. v. Occupa-", "paragraph_id": "para_259" }, { "text": "tional Safety and Health Review Comm’n, 430 U.S. 442 (1977));", "paragraph_id": "para_260" }, { "text": "see also Axalta Coating Sys. LLC v. Fed. Aviation Admin., 144", "paragraph_id": "para_261" }, { "text": "F.4th 467, 473 (3d Cir. 2025) (observing that the Supreme", "paragraph_id": "para_262" }, { "text": "Court “resolved the public rights question in Jarkesy in a no-", "paragraph_id": "para_263" }, { "text": "tably uncomplicated way: by analogizing the [agency’s] en-", "paragraph_id": "para_264" }, { "text": "forcement action to the action at issue in one public rights", "paragraph_id": "para_265" }, { "text": "precedent … and distinguishing it from the enforcement ac-", "paragraph_id": "para_266" }, { "text": "tion at issue in another”); Sligo Creek Ctr. v. United States Dep’t", "paragraph_id": "para_267" }, { "text": "of Health & Hum. Servs., 177 F.4th 556, 559–60 (4th Cir. 2026)", "paragraph_id": "para_268" }, { "text": "(agreeing with the Third Circuit’s characterization of Jarkesy).", "paragraph_id": "para_269" }, { "text": "Those previous decisions guide our analysis here.", "paragraph_id": "para_270" }, { "text": "In Atlas Roofing, the Court announced a broad rule permit-", "paragraph_id": "para_271" }, { "text": "ting agencies to pursue in-house enforcement of federal stat-", "paragraph_id": "para_272" }, { "text": "utory violations. See 430 U.S. at 455. The Occupational Safety", "paragraph_id": "para_273" }, { "text": "and Health Review Commission imposed monetary penalties", "paragraph_id": "para_274" }, { "text": "on two private employers, including Atlas Roofing, finding", "paragraph_id": "para_275" }, { "text": "that they violated safety standards promulgated under the", "paragraph_id": "para_276" }, { "text": "10 No. 24-3296", "paragraph_id": "para_277" }, { "text": "Occupational Safety and Health Act of 1970. See id. at 447–48.", "paragraph_id": "para_278" }, { "text": "Atlas and the second company then petitioned for review in", "paragraph_id": "para_279" }, { "text": "federal court, urging that the administrative adjudication of", "paragraph_id": "para_280" }, { "text": "the alleged violations ran afoul of the Seventh Amendment.", "paragraph_id": "para_281" }, { "text": "See id. at 448–49.", "paragraph_id": "para_282" }, { "text": "The Court disagreed and upheld the constitutionality of", "paragraph_id": "para_283" }, { "text": "the administrative enforcement action. See id. at 461. “[W]hen", "paragraph_id": "para_284" }, { "text": "Congress creates new statutory ‘public rights,’” enforced by", "paragraph_id": "para_285" }, { "text": "the government in its sovereign capacity, the Court explained,", "paragraph_id": "para_286" }, { "text": "“it may assign their adjudication to an administrative agency", "paragraph_id": "para_287" }, { "text": "with which a jury trial would be incompatible.” Id. at 455. The", "paragraph_id": "para_288" }, { "text": "Court concluded that the adjudication at issue involved pub-", "paragraph_id": "para_289" }, { "text": "lic rights because Congress, in enacting the Occupational", "paragraph_id": "para_290" }, { "text": "Safety and Health Act, created new statutory obligations,", "paragraph_id": "para_291" }, { "text": "“unknown to the common law,” to remedy national work-", "paragraph_id": "para_292" }, { "text": "place safety concerns. Id. at 450, 461.", "paragraph_id": "para_293" }, { "text": "By its terms, Atlas Roofing recognized that Congress has", "paragraph_id": "para_294" }, { "text": "broad authority to create public rights by developing new", "paragraph_id": "para_295" }, { "text": "causes of action within federal statutes that seek to address", "paragraph_id": "para_296" }, { "text": "national problems. See id. at 461 (“The Seventh Amendment", "paragraph_id": "para_297" }, { "text": "is no bar to the creation of new rights or to their enforcement", "paragraph_id": "para_298" }, { "text": "outside the regular courts of law.”); see also Axalta, 144 F.4th", "paragraph_id": "para_299" }, { "text": "at 483 (“[A]ny time Congress creates a cause of action en-", "paragraph_id": "para_300" }, { "text": "forced by the government, Atlas Roofing presumes that it in-", "paragraph_id": "para_301" }, { "text": "volves a public right.”) (Bibas, J., concurring).", "paragraph_id": "para_302" }, { "text": "While Atlas Roofing remains good law, the Court has nar-", "paragraph_id": "para_303" }, { "text": "rowed its application in two subsequent decisions. The first", "paragraph_id": "para_304" }, { "text": "was Granfinanciera, in which the Court determined that a", "paragraph_id": "para_305" }, { "text": "fraudulent conveyance action codified in the Bankruptcy", "paragraph_id": "para_306" }, { "text": "Code involved private rights. See 492 U.S. at 55. Because", "paragraph_id": "para_307" }, { "text": "“Congress simply reclassified a pre-existing, common-law", "paragraph_id": "para_308" }, { "text": "No. 24-3296 11", "paragraph_id": "para_309" }, { "text": "cause of action that was not integrally related to the refor-", "paragraph_id": "para_310" }, { "text": "mation of debtor-creditor relations” as one triable by a non-", "paragraph_id": "para_311" }, { "text": "Article III bankruptcy judge, the Court concluded that this", "paragraph_id": "para_312" }, { "text": "“purely taxonomic change” could not render the statutory", "paragraph_id": "para_313" }, { "text": "cause of action one involving public rights. Id. at 60–61. All of", "paragraph_id": "para_314" }, { "text": "this was despite the undeniable observation that the Bank-", "paragraph_id": "para_315" }, { "text": "ruptcy Code reflects a comprehensive statutory scheme for", "paragraph_id": "para_316" }, { "text": "providing debt relief and enabling financial reorganization.", "paragraph_id": "para_317" }, { "text": "The second narrowing came in Jarkesy, when the Court", "paragraph_id": "para_318" }, { "text": "confirmed and emphasized that not all obligations in federal", "paragraph_id": "para_319" }, { "text": "statutes fall within Atlas Roofing’s public rights ambit. The", "paragraph_id": "para_320" }, { "text": "clarification came as the Court considered “whether the Sev-", "paragraph_id": "para_321" }, { "text": "enth Amendment entitles a defendant to a jury trial when the", "paragraph_id": "para_322" }, { "text": "SEC seeks civil penalties against him for [statutory] securities", "paragraph_id": "para_323" }, { "text": "fraud.” Jarkesy, 603 U.S. at 120. The Court resolved the ques-", "paragraph_id": "para_324" }, { "text": "tion in the affirmative, concluding that the statutory securities", "paragraph_id": "para_325" }, { "text": "fraud actions at issue involved private rather than public", "paragraph_id": "para_326" }, { "text": "rights. See id. at 134. “If a suit is in the nature of an action at", "paragraph_id": "para_327" }, { "text": "common law,” the Court emphasized, “then the matter pre-", "paragraph_id": "para_328" }, { "text": "sumptively concerns private rights, and adjudication by an", "paragraph_id": "para_329" }, { "text": "Article III court is mandatory.” Id. at 128.", "paragraph_id": "para_330" }, { "text": "While the statutory fraud actions at issue in Jarkesy were", "paragraph_id": "para_331" }, { "text": "not identical to their common law counterpart, see id. at 126,", "paragraph_id": "para_332" }, { "text": "they “target[ed] the same basic conduct as common law", "paragraph_id": "para_333" }, { "text": "fraud, employ[ed] the same terms of art, and operate[d] pur-", "paragraph_id": "para_334" }, { "text": "suant to similar legal principles,” id. at 134. In short, the SEC’s", "paragraph_id": "para_335" }, { "text": "enforcement action based on the antifraud provisions of the", "paragraph_id": "para_336" }, { "text": "federal securities laws was “a common law suit in all but", "paragraph_id": "para_337" }, { "text": "name.” Id. at 136. This meant that Congress’s placement of the", "paragraph_id": "para_338" }, { "text": "action within a federal regulatory scheme did not transform", "paragraph_id": "para_339" }, { "text": "it into one involving public rights. See id. at 134.", "paragraph_id": "para_340" }, { "text": "12 No. 24-3296", "paragraph_id": "para_341" }, { "text": "But Jarkesy stopped short of overruling Atlas Roofing. To", "paragraph_id": "para_342" }, { "text": "the contrary, the Court left Atlas Roofing in place for statutory", "paragraph_id": "para_343" }, { "text": "causes of action that cannot “trace[] their ancestry to the com-", "paragraph_id": "para_344" }, { "text": "mon law.” Id. at 137; see also Axalta, 144 F.4th at 475 (observ-", "paragraph_id": "para_345" }, { "text": "ing that in Jarkesy “the Court distinguished, but did not over-", "paragraph_id": "para_346" }, { "text": "rule, its holding in Atlas Roofing”). After Jarkesy, then, Atlas", "paragraph_id": "para_347" }, { "text": "Roofing continues to govern the public rights inquiry for", "paragraph_id": "para_348" }, { "text": "agency enforcement actions based on statutory standards that", "paragraph_id": "para_349" }, { "text": "“bring no common law soil with them,” Jarkesy, 603 U.S. at", "paragraph_id": "para_350" }, { "text": "137, while Jarkesy applies to “traditional legal claims” embed-", "paragraph_id": "para_351" }, { "text": "ded in statutes, id. (cleaned up).", "paragraph_id": "para_352" }, { "text": "When it comes to discerning whether a statutory claim", "paragraph_id": "para_353" }, { "text": "brings with it “common law soil,” we believe the analysis", "paragraph_id": "para_354" }, { "text": "should focus on the Founding Era. We say this because, in", "paragraph_id": "para_355" }, { "text": "laying the foundation for its public rights analysis, the Court", "paragraph_id": "para_356" }, { "text": "in Jarkesy explained that “[a] hallmark that we have looked to", "paragraph_id": "para_357" }, { "text": "in determining if a suit concerns private rights is whether it is", "paragraph_id": "para_358" }, { "text": "made of the stuff of the traditional actions at common law", "paragraph_id": "para_359" }, { "text": "tried by the courts at Westminster in 1789.” Id. at 127–28", "paragraph_id": "para_360" }, { "text": "(cleaned up).", "paragraph_id": "para_361" }, { "text": "Jarkesy also explicitly relied on principles it derived from", "paragraph_id": "para_362" }, { "text": "its prior decision in Granfinanciera. See id. at 134 (“Granfinan-", "paragraph_id": "para_363" }, { "text": "ciera effectively decides this case.”). In Jarkesy’s recitation of", "paragraph_id": "para_364" }, { "text": "the relevant points from Granfinanciera, the Court highlighted", "paragraph_id": "para_365" }, { "text": "that “[a] survey of English cases showed that actions to re-", "paragraph_id": "para_366" }, { "text": "cover fraudulent transfers were often brought at law in late", "paragraph_id": "para_367" }, { "text": "18th-century England.” Id. at 133 (cleaned up).", "paragraph_id": "para_368" }, { "text": "To be sure, Jarkesy did not expressly tell us how its analysis", "paragraph_id": "para_369" }, { "text": "would apply to a statutory claim with an analogue to a cause", "paragraph_id": "para_370" }, { "text": "of action that became part of the common law later than 1789.", "paragraph_id": "para_371" }, { "text": "But our best answer based on the guidance we find in Jarkesy", "paragraph_id": "para_372" }, { "text": "No. 24-3296 13", "paragraph_id": "para_373" }, { "text": "is that common law at the Founding should be our benchmark", "paragraph_id": "para_374" }, { "text": "for private rights.", "paragraph_id": "para_375" }, { "text": "Putting this all together, our task under Jarkesy’s second", "paragraph_id": "para_376" }, { "text": "step is to determine whether the statutory claims the FDIC", "paragraph_id": "para_377" }, { "text": "administratively brought against Frank Bonan were akin to", "paragraph_id": "para_378" }, { "text": "suits at common law at the Founding and governed by Jarkesy,", "paragraph_id": "para_379" }, { "text": "or are instead unknown to the common law and governed by", "paragraph_id": "para_380" }, { "text": "Atlas Roofing.", "paragraph_id": "para_381" }, { "text": "With this in mind, we consider the two statutory causes of", "paragraph_id": "para_382" }, { "text": "action that the FDIC invoked in its enforcement action against", "paragraph_id": "para_383" }, { "text": "Bonan. The Federal Deposit Insurance Act, as codified at 12", "paragraph_id": "para_384" }, { "text": "U.S.C. § 1818(i), permits the FDIC to impose a civil money", "paragraph_id": "para_385" }, { "text": "penalty on the director of a federally insured bank who “reck-", "paragraph_id": "para_386" }, { "text": "lessly engages in an unsafe or unsound practice in conducting", "paragraph_id": "para_387" }, { "text": "the affairs of such insured depository institution” or", "paragraph_id": "para_388" }, { "text": "“breaches any fiduciary duty.” 12 U.S.C.", "paragraph_id": "para_389" }, { "text": "§§ 1818(i)(2)(B)(i)(II)–(III). Section 1818(e) in turn allows the", "paragraph_id": "para_390" }, { "text": "FDIC to issue an order prohibiting a director from working at", "paragraph_id": "para_391" }, { "text": "any federally insured depository institution based on similar", "paragraph_id": "para_392" }, { "text": "misconduct. See id. §§ 1818(e)(1)(A)(ii)–(iii). Based on this", "paragraph_id": "para_393" }, { "text": "shared core of prohibited misconduct, we conclude that nei-", "paragraph_id": "para_394" }, { "text": "ther § 1818(i) nor § 1818(e) is akin to a common law action at", "paragraph_id": "para_395" }, { "text": "the Founding.", "paragraph_id": "para_396" }, { "text": "We begin with an “unsafe or unsound practice,” which", "paragraph_id": "para_397" }, { "text": "underlies the FDIC’s imposition on Bonan of both the money", "paragraph_id": "para_398" }, { "text": "penalty and the prohibition order. This standard brings no", "paragraph_id": "para_399" }, { "text": "common law soil with it, as the term likely emerged from", "paragraph_id": "para_400" }, { "text": "nineteenth century state banking laws. See Thomas L.", "paragraph_id": "para_401" }, { "text": "Holzman, Unsafe or Unsound Practices: Is the Current Judicial", "paragraph_id": "para_402" }, { "text": "Interpretation of the Term Unsafe or Unsound?, 19 Ann. Rev.", "paragraph_id": "para_403" }, { "text": "Banking L. 425, 429 n.21 (2000). Congress first used “unsafe or", "paragraph_id": "para_404" }, { "text": "14 No. 24-3296", "paragraph_id": "para_405" }, { "text": "unsound practices” in federal banking law in 1933, and it now", "paragraph_id": "para_406" }, { "text": "serves as a basis for enforcement actions against bank direc-", "paragraph_id": "para_407" }, { "text": "tors across many provisions of federal law. See Heidi Man-", "paragraph_id": "para_408" }, { "text": "danis Schooner, Fiduciary Duties’ Demanding Cousin: Bank Di-", "paragraph_id": "para_409" }, { "text": "rector Liability for Unsafe or Unsound Banking Practices, 63 Geo.", "paragraph_id": "para_410" }, { "text": "Wash. L. Rev. 175, 202 (1995). Congress has often left unsafe", "paragraph_id": "para_411" }, { "text": "or unsound practices undefined in these provisions, see id. at", "paragraph_id": "para_412" }, { "text": "187–89, deliberately allowing the term to serve as a gap-filling", "paragraph_id": "para_413" }, { "text": "prohibition on conduct not otherwise covered in the federal", "paragraph_id": "para_414" }, { "text": "regulatory scheme, see id. at 187. To put the point another", "paragraph_id": "para_415" }, { "text": "way, unsafe or unsound practices is a regulatory—rather than", "paragraph_id": "para_416" }, { "text": "common law—term of art. See Lawrence G. Baxter, Fiduciary", "paragraph_id": "para_417" }, { "text": "Issues in Federal Banking Regulation, 56 Law & Contemp. Probs.", "paragraph_id": "para_418" }, { "text": "7, 23–24 (1993) (describing the duty not to engage in unsafe", "paragraph_id": "para_419" }, { "text": "and unsound conduct as “a fundamental regulatory principle", "paragraph_id": "para_420" }, { "text": "distinctive to federally insured banking”).", "paragraph_id": "para_421" }, { "text": "The most widespread working definition of an unsafe or", "paragraph_id": "para_422" }, { "text": "unsound practice, which the administrative record shows the", "paragraph_id": "para_423" }, { "text": "FDIC relied upon in its action against Bonan, underscores the", "paragraph_id": "para_424" }, { "text": "unique regulatory origins of the term. This definition comes", "paragraph_id": "para_425" }, { "text": "not from common law principles but from the legislative his-", "paragraph_id": "para_426" }, { "text": "tory of the Financial Institutions Supervisory Act of 1966:", "paragraph_id": "para_427" }, { "text": "Generally speaking, an ‘unsafe or unsound", "paragraph_id": "para_428" }, { "text": "practice’ embraces any action, or lack of action,", "paragraph_id": "para_429" }, { "text": "which is contrary to generally accepted stand-", "paragraph_id": "para_430" }, { "text": "ards of prudent operation, the possible conse-", "paragraph_id": "para_431" }, { "text": "quences of which, if continued, would be abnor-", "paragraph_id": "para_432" }, { "text": "mal risk or loss or damage to an institution, its", "paragraph_id": "para_433" }, { "text": "shareholders, or the agencies administering the", "paragraph_id": "para_434" }, { "text": "insurance funds.", "paragraph_id": "para_435" }, { "text": "No. 24-3296 15", "paragraph_id": "para_436" }, { "text": "Hearings on S. 3158 Before the House Comm. on Banking and", "paragraph_id": "para_437" }, { "text": "Currency, 89th Cong., 2d Sess. 49–50 (1966) (memorandum of", "paragraph_id": "para_438" }, { "text": "John Horne, Chairman of the Federal Home Loan Bank", "paragraph_id": "para_439" }, { "text": "Board); see also, e.g., Michael v. FDIC, 687 F.3d 337, 352 (7th", "paragraph_id": "para_440" }, { "text": "Cir. 2012) (using nearly identical language to describe an un-", "paragraph_id": "para_441" }, { "text": "safe or unsound banking practice in the context of § 1818(e));", "paragraph_id": "para_442" }, { "text": "Matter of Seidman, 37 F.3d 911, 926–27 (3d Cir. 1994) (employ-", "paragraph_id": "para_443" }, { "text": "ing this standard verbatim for an action under § 1818(b));", "paragraph_id": "para_444" }, { "text": "Schooner, Fiduciary Duties’ Demanding Cousin, at 190 (“In", "paragraph_id": "para_445" }, { "text": "seeking a general definition for unsafe or unsound banking", "paragraph_id": "para_446" }, { "text": "practices, the courts have relied on either Chairman Horne’s", "paragraph_id": "para_447" }, { "text": "definition or one almost identical to it.”).", "paragraph_id": "para_448" }, { "text": "As we see it, this definition addresses itself to actions that", "paragraph_id": "para_449" }, { "text": "present risk to the solvency of regulated banks. See Baxter, Fi-", "paragraph_id": "para_450" }, { "text": "duciary Issues, at 23 (“The duty to act safely and soundly is", "paragraph_id": "para_451" }, { "text": "basically a duty not to take actions that might place the sol-", "paragraph_id": "para_452" }, { "text": "vency of the banking institution in jeopardy.”). And our re-", "paragraph_id": "para_453" }, { "text": "search has turned up no common law cause of action at the", "paragraph_id": "para_454" }, { "text": "Founding that targets the same conduct or operates under", "paragraph_id": "para_455" }, { "text": "similar legal principles. Cf. Jarkesy, 603 U.S. at 134.", "paragraph_id": "para_456" }, { "text": "So too with the other misconduct element underlying the", "paragraph_id": "para_457" }, { "text": "FDIC’s enforcement action against Bonan under §§ 1818(i) &", "paragraph_id": "para_458" }, { "text": "(e): breach of fiduciary duty. At a general level, fiduciary duty", "paragraph_id": "para_459" }, { "text": "is a heartland equitable concept. See Deborah A. DeMott, Be-", "paragraph_id": "para_460" }, { "text": "yond Metaphor: An Analysis of Fiduciary Obligation, 1988 Duke", "paragraph_id": "para_461" }, { "text": "L. J. 879, 880 (1988) (“As a legal principle, [fiduciary] obliga-", "paragraph_id": "para_462" }, { "text": "tion originated in Equity.”). It evolved to prevent the abuse of", "paragraph_id": "para_463" }, { "text": "relationships in which one person has reposed their trust in", "paragraph_id": "para_464" }, { "text": "another. See id. And courts of equity—not common law", "paragraph_id": "para_465" }, { "text": "courts—enforced the obligations arising from these relation-", "paragraph_id": "para_466" }, { "text": "ships. See Chauffeurs, Teamsters and Helpers, Local No. 391 v.", "paragraph_id": "para_467" }, { "text": "16 No. 24-3296", "paragraph_id": "para_468" }, { "text": "Terry, 494 U.S. 558, 567 (1990) (observing that “action[s] by a", "paragraph_id": "para_469" }, { "text": "trust beneficiary against a trustee for breach of fiduciary", "paragraph_id": "para_470" }, { "text": "duty” were “within the exclusive jurisdiction of courts of eq-", "paragraph_id": "para_471" }, { "text": "uity” (citing 2 J. Story, Commentaries on Equity Jurispru-", "paragraph_id": "para_472" }, { "text": "dence § 960, at 266 (13th ed. 1886))); CIGNA Corp. v. Amara,", "paragraph_id": "para_473" }, { "text": "563 U.S. 421, 439 (2011) (explaining that “before the merger of", "paragraph_id": "para_474" }, { "text": "law and equity,” a trust beneficiary “could have brought only", "paragraph_id": "para_475" }, { "text": "in a court of equity” a suit against a trustee who was a “fidu-", "paragraph_id": "para_476" }, { "text": "ciary”); Kamen v. Kemper Fin. Servs., Inc., 908 F.2d 1338, 1351", "paragraph_id": "para_477" }, { "text": "(7th Cir. 1990) (“[E]nforcing fiduciary duties was equitable in", "paragraph_id": "para_478" }, { "text": "English practice ….”), rev’d on other grounds, 500 U.S. 90", "paragraph_id": "para_479" }, { "text": "(1991). We therefore do not see an action to enforce the breach", "paragraph_id": "para_480" }, { "text": "of a fiduciary duty as “a common law suit in all but name.”", "paragraph_id": "para_481" }, { "text": "Jarkesy, 603 U.S. at 136.", "paragraph_id": "para_482" }, { "text": "Focusing on the narrower context of banking, Bonan offers", "paragraph_id": "para_483" }, { "text": "us no basis to conclude that fiduciary duties even applied to", "paragraph_id": "para_484" }, { "text": "bank directors at the Founding. See Patricia A. McCoy, A Po-", "paragraph_id": "para_485" }, { "text": "litical Economy of the Business Judgment Rule in Banking: Impli-", "paragraph_id": "para_486" }, { "text": "cations for Corporate Law, 47 Case W. Res. L. Rev. 1, 22 (1996)", "paragraph_id": "para_487" }, { "text": "(placing the first reported bank director liability cases in the", "paragraph_id": "para_488" }, { "text": "nineteenth century). It does appear, however, that toward the", "paragraph_id": "para_489" }, { "text": "end of the nineteenth century, courts began to recognize and", "paragraph_id": "para_490" }, { "text": "enforce the fiduciary duties of bank directors, and not solely", "paragraph_id": "para_491" }, { "text": "as creatures of equity. See id. at 34–38 (discussing the emer-", "paragraph_id": "para_492" }, { "text": "gence of common-law tort standards as the most important", "paragraph_id": "para_493" }, { "text": "basis of bank director liability beginning in the 1890s); see also", "paragraph_id": "para_494" }, { "text": "Bowerman v. Hamner, 250 U.S. 504, 511 (1919) (describing", "paragraph_id": "para_495" }, { "text": "Briggs v. Spaulding, 141 U.S. 132 (1891), as having offered “the", "paragraph_id": "para_496" }, { "text": "rule for determining the common-law liability” of directors of", "paragraph_id": "para_497" }, { "text": "national banks); Atherton v. FDIC, 519 U.S. 213, 217 (1997)", "paragraph_id": "para_498" }, { "text": "(“We recognize … that this Court did once articulate federal", "paragraph_id": "para_499" }, { "text": "No. 24-3296 17", "paragraph_id": "para_500" }, { "text": "common-law corporate governance standards, applicable to", "paragraph_id": "para_501" }, { "text": "federally chartered banks.”).", "paragraph_id": "para_502" }, { "text": "So, by 1966, when Congress added breach of fiduciary", "paragraph_id": "para_503" }, { "text": "duty to the federal banking laws as a basis for bank director", "paragraph_id": "para_504" }, { "text": "sanction, see Baxter, Fiduciary Issues, at 26, an action for breach", "paragraph_id": "para_505" }, { "text": "of fiduciary duty in the banking context had twentieth cen-", "paragraph_id": "para_506" }, { "text": "tury common law soil. But this is not the kind of common law", "paragraph_id": "para_507" }, { "text": "development that we understand to be legally significant", "paragraph_id": "para_508" }, { "text": "based on Jarkesy. Our focus is on the Founding Era, and at that", "paragraph_id": "para_509" }, { "text": "time, breach of fiduciary duty was an equitable action that", "paragraph_id": "para_510" }, { "text": "does not appear to have extended to bank directors.", "paragraph_id": "para_511" }, { "text": "In our final analysis, then, we conclude that the FDIC’s en-", "paragraph_id": "para_512" }, { "text": "forcement action under §§ 1818(i) & (e) involves public rights", "paragraph_id": "para_513" }, { "text": "under the reasoning of Atlas Roofing. This means that Con-", "paragraph_id": "para_514" }, { "text": "gress may assign the adjudication of these causes of action to", "paragraph_id": "para_515" }, { "text": "an agency without violating the Seventh Amendment. See", "paragraph_id": "para_516" }, { "text": "also Ortega v. OCC, 155 F.4th 394, 403–09 (5th Cir. 2025) (con-", "paragraph_id": "para_517" }, { "text": "cluding that enforcement actions under § 1818 involve public", "paragraph_id": "para_518" }, { "text": "rights by focusing on the history of federal bank regulation).", "paragraph_id": "para_519" }, { "text": "III", "paragraph_id": "para_520" }, { "text": "We see Bonan’s Seventh Amendment claim as a close and", "paragraph_id": "para_521" }, { "text": "challenging call, and it seems prudent to explain why. Here", "paragraph_id": "para_522" }, { "text": "we focus on Congress’s incorporation in §§ 1818(i) & (e) of a", "paragraph_id": "para_523" }, { "text": "claim for breach of fiduciary duty as one basis for in-house", "paragraph_id": "para_524" }, { "text": "agency adjudication.", "paragraph_id": "para_525" }, { "text": "Recall that in Jarkesy the Supreme Court described public", "paragraph_id": "para_526" }, { "text": "rights as an exception “to Article III jurisdiction.” 603 U.S. at", "paragraph_id": "para_527" }, { "text": "120. And, while acknowledging that the boundaries of the ex-", "paragraph_id": "para_528" }, { "text": "ception remain fuzzy, the Court was clear on the consequence", "paragraph_id": "para_529" }, { "text": "when a case involves public rights: “no involvement by an", "paragraph_id": "para_530" }, { "text": "18 No. 24-3296", "paragraph_id": "para_531" }, { "text": "Article III court in the initial adjudication is necessary.” Id. at", "paragraph_id": "para_532" }, { "text": "128. Based on this description, it seems sensible to expect Ar-", "paragraph_id": "para_533" }, { "text": "ticle III (and the case law interpreting it) to inform, if not de-", "paragraph_id": "para_534" }, { "text": "fine, the contours of public and private rights.", "paragraph_id": "para_535" }, { "text": "This conclusion would suggest that the public rights ex-", "paragraph_id": "para_536" }, { "text": "ception is narrower—and the category of causes of action in-", "paragraph_id": "para_537" }, { "text": "volving private rights is larger—than what the Court’s analy-", "paragraph_id": "para_538" }, { "text": "sis in Jarkesy seems to convey. By its terms, Article III extends", "paragraph_id": "para_539" }, { "text": "the “judicial Power” to “all Cases, in Law and Equity.” U.S.", "paragraph_id": "para_540" }, { "text": "Const. art. III, § 2. If the public rights exception attempts to", "paragraph_id": "para_541" }, { "text": "capture those cases that do not fall within this core judicial", "paragraph_id": "para_542" }, { "text": "power, and thereby do not require Article III adjudication in", "paragraph_id": "para_543" }, { "text": "the first instance, see Jarkesy, 603 U.S. at 128, it is unclear based", "paragraph_id": "para_544" }, { "text": "on the Constitution’s text why rights traditionally adjudicated", "paragraph_id": "para_545" }, { "text": "in courts of equity would be subject to a different public rights", "paragraph_id": "para_546" }, { "text": "analysis than those at common law. Put another way, when it", "paragraph_id": "para_547" }, { "text": "comes to first principles, we do not see why the equitable lin-", "paragraph_id": "para_548" }, { "text": "eage of fiduciary duties cannot render them private rights in", "paragraph_id": "para_549" }, { "text": "Article III terms.", "paragraph_id": "para_550" }, { "text": "And, indeed, the Supreme Court’s case law has suggested", "paragraph_id": "para_551" }, { "text": "at times that traditional cases in equity involve private rights.", "paragraph_id": "para_552" }, { "text": "In Murray’s Lessee v. Hoboken Land & Improvement Co., the case", "paragraph_id": "para_553" }, { "text": "that first recognized the public rights exception, the Supreme", "paragraph_id": "para_554" }, { "text": "Court adopted a definition of private rights that tracked more", "paragraph_id": "para_555" }, { "text": "closely Article III’s text, emphasizing that Congress could not", "paragraph_id": "para_556" }, { "text": "“withdraw from judicial cognizance any matter which, from", "paragraph_id": "para_557" }, { "text": "its nature, is the subject of a suit at the common law, or in equity,", "paragraph_id": "para_558" }, { "text": "or admiralty.” 59 U.S. (18 How.) 272, 284 (1856) (emphasis", "paragraph_id": "para_559" }, { "text": "added).", "paragraph_id": "para_560" }, { "text": "This statement of general principle from Murray’s Lessee", "paragraph_id": "para_561" }, { "text": "has endured to the Court’s most recent cases, even to Jarkesy.", "paragraph_id": "para_562" }, { "text": "No. 24-3296 19", "paragraph_id": "para_563" }, { "text": "See Jarkesy, 603 U.S. at 132 (referencing this precise language", "paragraph_id": "para_564" }, { "text": "in Murray’s Lessee); see also Granfinanciera, 492 U.S. at 56 (ob-", "paragraph_id": "para_565" }, { "text": "serving in its public rights analysis that “matters from their", "paragraph_id": "para_566" }, { "text": "nature subject to a suit at common law or in equity or admi-", "paragraph_id": "para_567" }, { "text": "ralty lie at the protected core of Article III judicial power”", "paragraph_id": "para_568" }, { "text": "(quoting N. Pipeline Const. Co. v. Marathon Pipe Line Co., 458", "paragraph_id": "para_569" }, { "text": "U.S. 50, 71 n.25 (1982) (plurality opinion by Brennan, J.)", "paragraph_id": "para_570" }, { "text": "(cleaned up))). The Supreme Court has even observed, albeit", "paragraph_id": "para_571" }, { "text": "in dicta, that “breach of fiduciary duty claims … involve pri-", "paragraph_id": "para_572" }, { "text": "vate rights which are at the core of matters normally reserved", "paragraph_id": "para_573" }, { "text": "to Article III courts.” Coit Indep. Joint Venture v. Fed. Sav. and", "paragraph_id": "para_574" }, { "text": "Loan Ins. Corp., 489 U.S. 561, 578–79 (1989) (cleaned up). All", "paragraph_id": "para_575" }, { "text": "this to say, there is plenty to support the conclusion that pri-", "paragraph_id": "para_576" }, { "text": "vate rights encompass traditional actions at equity, including", "paragraph_id": "para_577" }, { "text": "the breach of fiduciary duty claims embedded in §§ 1818(i) &", "paragraph_id": "para_578" }, { "text": "(e). See Intuit, Inc. v. FTC, 170 F.4th 411, 418 (5th Cir. 2026)", "paragraph_id": "para_579" }, { "text": "(concluding that traditional actions at both law and equity in-", "paragraph_id": "para_580" }, { "text": "volve private rights under Article III); but see id. at 417 n.5", "paragraph_id": "para_581" }, { "text": "(suggesting the distinction between law and equity may have", "paragraph_id": "para_582" }, { "text": "been “relevant” if the plaintiff had “claimed a right to a jury", "paragraph_id": "para_583" }, { "text": "trial under the Seventh Amendment”).", "paragraph_id": "para_584" }, { "text": "But we hew closely to the Supreme Court’s most recent", "paragraph_id": "para_585" }, { "text": "direction on applying the public rights exception, which", "paragraph_id": "para_586" }, { "text": "comes from Jarkesy. And Jarkesy clarified that Atlas Roofing’s", "paragraph_id": "para_587" }, { "text": "capacious view of public rights does not apply to statutory", "paragraph_id": "para_588" }, { "text": "causes of action borrowed from the common law. It did not", "paragraph_id": "para_589" }, { "text": "pare back Atlas Roofing’s application from statutory claims re-", "paragraph_id": "para_590" }, { "text": "sembling other cases at the core of Article III, like traditional", "paragraph_id": "para_591" }, { "text": "actions at equity. See Jarkesy, 603 U.S. at 138 (“[Atlas Roofing]", "paragraph_id": "para_592" }, { "text": "does not control here, where the statutory claim is in the na-", "paragraph_id": "para_593" }, { "text": "ture of a common law suit.” (cleaned up)); id. at 137–38 (“The", "paragraph_id": "para_594" }, { "text": "cases that Atlas Roofing relied upon did not extend the public", "paragraph_id": "para_595" }, { "text": "20 No. 24-3296", "paragraph_id": "para_596" }, { "text": "rights exception to traditional legal claims. Instead, they ap-", "paragraph_id": "para_597" }, { "text": "plied the exception to actions that were not suits at common", "paragraph_id": "para_598" }, { "text": "law or in the nature of such suits.” (cleaned up)); see also Ax-", "paragraph_id": "para_599" }, { "text": "alta, 144 F.4th at 483 (Bibas, J., concurring) (“Together, [the Su-", "paragraph_id": "para_600" }, { "text": "preme Court’s public rights cases] hold that (1) when Con-", "paragraph_id": "para_601" }, { "text": "gress creates a cause of action enforced by the government as", "paragraph_id": "para_602" }, { "text": "sovereign, then it involves public rights, unless (2) it resem-", "paragraph_id": "para_603" }, { "text": "bles a preexisting action at common law.”).", "paragraph_id": "para_604" }, { "text": "As a lower federal court, our role is to follow the Supreme", "paragraph_id": "para_605" }, { "text": "Court’s precedent, not guess its future direction. See Hohn v.", "paragraph_id": "para_606" }, { "text": "United States, 524 U.S. 236, 252–53 (1998) (“Our decisions re-", "paragraph_id": "para_607" }, { "text": "main binding precedent until we see fit to reconsider them,", "paragraph_id": "para_608" }, { "text": "regardless of whether subsequent cases have raised doubts", "paragraph_id": "para_609" }, { "text": "about their continuing vitality.”). The Court has not made", "paragraph_id": "para_610" }, { "text": "clear that statutory causes of action resembling traditional eq-", "paragraph_id": "para_611" }, { "text": "uitable actions involve private rights for the purposes of Sev-", "paragraph_id": "para_612" }, { "text": "enth Amendment analysis. In time the Justices are sure to con-", "paragraph_id": "para_613" }, { "text": "sider this question. Until they do, we believe the appropriate", "paragraph_id": "para_614" }, { "text": "path is to adhere to Atlas Roofing. It is on this basis that Bo-", "paragraph_id": "para_615" }, { "text": "nan’s Seventh Amendment claim fails.", "paragraph_id": "para_616" }, { "text": "IV", "paragraph_id": "para_617" }, { "text": "We turn next to Bonan’s other challenges to the FDIC’s en-", "paragraph_id": "para_618" }, { "text": "forcement proceeding.", "paragraph_id": "para_619" }, { "text": "A", "paragraph_id": "para_620" }, { "text": "Bonan first contends that the FDIC Board and the agency’s", "paragraph_id": "para_621" }, { "text": "administrative law judges were unconstitutionally insulated", "paragraph_id": "para_622" }, { "text": "from presidential oversight during the enforcement proceed-", "paragraph_id": "para_623" }, { "text": "ing. Specifically, he highlights that the FDIC’s Board members", "paragraph_id": "para_624" }, { "text": "serve for a statutorily defined term of years, see 12 U.S.C.", "paragraph_id": "para_625" }, { "text": "§ 1812(b)–(c), and that its ALJs enjoy two layers of “for-cause”", "paragraph_id": "para_626" }, { "text": "No. 24-3296 21", "paragraph_id": "para_627" }, { "text": "protection from removal, see 5 U.S.C. § 7521. Bonan urges that", "paragraph_id": "para_628" }, { "text": "these statutory restrictions on the President’s removal power", "paragraph_id": "para_629" }, { "text": "violate Article II of the Constitution and therefore require us", "paragraph_id": "para_630" }, { "text": "to vacate the Board’s decision and orders.", "paragraph_id": "para_631" }, { "text": "For its part, the FDIC does not defend the constitutionality", "paragraph_id": "para_632" }, { "text": "of these removal protections, instead asserting that Bonan is", "paragraph_id": "para_633" }, { "text": "not entitled to relief because he has not shown the removal", "paragraph_id": "para_634" }, { "text": "restrictions caused him compensable harm. We agree that un-", "paragraph_id": "para_635" }, { "text": "der current law Bonan needs to show harm and has failed to", "paragraph_id": "para_636" }, { "text": "do so, making it unnecessary for us to opine on Bonan’s un-", "paragraph_id": "para_637" }, { "text": "derlying constitutional challenge to the removal restrictions.", "paragraph_id": "para_638" }, { "text": "Five years ago, in Collins v. Yellen, the Supreme Court es-", "paragraph_id": "para_639" }, { "text": "tablished that we need not regard “as void” the actions of an", "paragraph_id": "para_640" }, { "text": "unconstitutionally insulated administrative official. 594 U.S.", "paragraph_id": "para_641" }, { "text": "220, 258 (2021). Unlike in an instance of improper appoint-", "paragraph_id": "para_642" }, { "text": "ment, the Court found “no basis for concluding” that an ad-", "paragraph_id": "para_643" }, { "text": "ministrative official enjoying unconstitutional protection", "paragraph_id": "para_644" }, { "text": "from the President’s removal power “lacked the authority to", "paragraph_id": "para_645" }, { "text": "carry out the functions of the office.” Id. at 258. In so holding,", "paragraph_id": "para_646" }, { "text": "however, the Court left open the possibility of relief if the un-", "paragraph_id": "para_647" }, { "text": "constitutional restriction “inflict[ed] compensable harm” on", "paragraph_id": "para_648" }, { "text": "the plaintiff. Id. at 259.", "paragraph_id": "para_649" }, { "text": "To date, Collins has come to stand for the proposition that", "paragraph_id": "para_650" }, { "text": "a successful challenge to an administrative action on removal", "paragraph_id": "para_651" }, { "text": "grounds does not entitle a party to relief without a showing", "paragraph_id": "para_652" }, { "text": "that the unconstitutional restriction on the President’s power", "paragraph_id": "para_653" }, { "text": "caused compensable harm. See, e.g., CFPB v. Law Offs. of Crys-", "paragraph_id": "para_654" }, { "text": "tal Moroney, P.C., 63 F.4th 174, 179 (2d Cir. 2023); Axalta, 144", "paragraph_id": "para_655" }, { "text": "F.4th at 479–80; Calcutt v. FDIC, 37 F.4th 293, 314–15 (6th Cir.", "paragraph_id": "para_656" }, { "text": "2022), rev’d on other grounds, 598 U.S. 623 (2023); Bhatti v. Fed.", "paragraph_id": "para_657" }, { "text": "Hous. Fin. Agency, 15 F.4th 848, 853–54 (8th Cir. 2021);", "paragraph_id": "para_658" }, { "text": "22 No. 24-3296", "paragraph_id": "para_659" }, { "text": "Kaufmann v. Kijakazi, 32 F.4th 843, 849 (9th Cir. 2022); Leachco,", "paragraph_id": "para_660" }, { "text": "Inc. v. Consumer Prod. Safety Comm’n, 103 F.4th 748, 756–57", "paragraph_id": "para_661" }, { "text": "(10th Cir. 2024); Rodriguez v. Social Sec. Admin., 118 F.4th 1302,", "paragraph_id": "para_662" }, { "text": "1314 (11th Cir. 2024). But see Space Expl. Techs. Corp. v. NLRB,", "paragraph_id": "para_663" }, { "text": "151 F.4th 761, 780 (5th Cir. 2025) (limiting Collins’s reach to", "paragraph_id": "para_664" }, { "text": "only “retrospective relief from final agency action”). We too", "paragraph_id": "para_665" }, { "text": "adopt this understanding of Collins.", "paragraph_id": "para_666" }, { "text": "Collins itself went on to offer some guidance on when an", "paragraph_id": "para_667" }, { "text": "unconstitutional removal restriction might inflict harm. “Sup-", "paragraph_id": "para_668" }, { "text": "pose, for example, that the President had attempted to re-", "paragraph_id": "para_669" }, { "text": "move [an administrative official] but was prevented from do-", "paragraph_id": "para_670" }, { "text": "ing so by a lower court decision holding that he did not have", "paragraph_id": "para_671" }, { "text": "‘cause’ for removal.” Collins, 594 U.S. at 259. “Or suppose the", "paragraph_id": "para_672" }, { "text": "President had made a public statement expressing displeas-", "paragraph_id": "para_673" }, { "text": "ure with actions taken by [the official] and had asserted that", "paragraph_id": "para_674" }, { "text": "he would remove [them] if the statute did not stand in the", "paragraph_id": "para_675" }, { "text": "way.” Id. at 260. We take from these examples that a party", "paragraph_id": "para_676" }, { "text": "challenging a removal restriction must show, at a minimum,", "paragraph_id": "para_677" }, { "text": "that the unconstitutional protection actually impacted the", "paragraph_id": "para_678" }, { "text": "particular action against them. See Leachco, 103 F.4th at 756", "paragraph_id": "para_679" }, { "text": "(“[H]e must demonstrate that the unconstitutional removal", "paragraph_id": "para_680" }, { "text": "provision actually affected the agency’s decision or conduct", "paragraph_id": "para_681" }, { "text": "against him.”); L. Offs. of Crystal Moroney, 63 F.4th at 179–80", "paragraph_id": "para_682" }, { "text": "(observing that courts have disagreed in the wake of Collins", "paragraph_id": "para_683" }, { "text": "about how a party must demonstrate compensable harm and", "paragraph_id": "para_684" }, { "text": "adopting a requirement that “a party must show that the", "paragraph_id": "para_685" }, { "text": "agency action would not have been taken but for the Presi-", "paragraph_id": "para_686" }, { "text": "dent’s inability to remove the agency head”).", "paragraph_id": "para_687" }, { "text": "Here, Bonan objects only to the restrictions on removal", "paragraph_id": "para_688" }, { "text": "protecting the FDIC Board and the agency’s ALJs, not the pro-", "paragraph_id": "para_689" }, { "text": "cess by which such agency officials are appointed. His", "paragraph_id": "para_690" }, { "text": "No. 24-3296 23", "paragraph_id": "para_691" }, { "text": "challenge thus falls squarely under Collins, requiring him to", "paragraph_id": "para_692" }, { "text": "show compensable harm. On this front, Bonan suggests that", "paragraph_id": "para_693" }, { "text": "the President may have chosen to exercise his power to re-", "paragraph_id": "para_694" }, { "text": "move FDIC Board members or the agency’s ALJs if the re-", "paragraph_id": "para_695" }, { "text": "strictions were not in place, pointing to the Solicitor General’s", "paragraph_id": "para_696" }, { "text": "position in similar litigation that the insulation of FDIC ad-", "paragraph_id": "para_697" }, { "text": "ministrative law judges is unconstitutional. See Notice of", "paragraph_id": "para_698" }, { "text": "Change in Position by FDIC at 1, CBW Bank v. FDIC, No. 24-", "paragraph_id": "para_699" }, { "text": "cv-2535 (D. Kan. Feb. 24, 2025), Dkt. No. 33. But Bonan’s spec-", "paragraph_id": "para_700" }, { "text": "ulation is insufficient under Collins. He has not demonstrated,", "paragraph_id": "para_701" }, { "text": "or for that matter even attempted to show, that the removal", "paragraph_id": "para_702" }, { "text": "restrictions actually affected any aspect of the agency pro-", "paragraph_id": "para_703" }, { "text": "ceeding against him. See Kaufmann, 32 F.4th at 850 (“Nothing", "paragraph_id": "para_704" }, { "text": "in the record suggests any link whatsoever between the re-", "paragraph_id": "para_705" }, { "text": "moval provision and Claimant’s case.”).", "paragraph_id": "para_706" }, { "text": "Bonan resists the application of Collins’s harm require-", "paragraph_id": "para_707" }, { "text": "ment by contending that an unconstitutional removal re-", "paragraph_id": "para_708" }, { "text": "striction is a form of structural error that mandates reversal.", "paragraph_id": "para_709" }, { "text": "Structural error cases contain “defect[s] affecting the frame-", "paragraph_id": "para_710" }, { "text": "work within which the trial proceeds, rather than simply an", "paragraph_id": "para_711" }, { "text": "error in the trial process itself.” Arizona v. Fulminante, 499 U.S.", "paragraph_id": "para_712" }, { "text": "279, 310 (1991). If an error is structural, it mandates automatic", "paragraph_id": "para_713" }, { "text": "reversal, and harmless error does not apply. See Washington", "paragraph_id": "para_714" }, { "text": "v. Recuenco, 548 U.S. 212, 218 (2006). The Supreme Court has", "paragraph_id": "para_715" }, { "text": "recognized structural error only in a “very limited class of", "paragraph_id": "para_716" }, { "text": "cases,” Neder v. United States, 527 U.S. 1, 8 (1999) (cleaned up),", "paragraph_id": "para_717" }, { "text": "often in which the error deprives a criminal defendant of the", "paragraph_id": "para_718" }, { "text": "basic protections of a criminal trial, see id. (collecting exam-", "paragraph_id": "para_719" }, { "text": "ples).", "paragraph_id": "para_720" }, { "text": "The reasoning of Collins counsels against classifying an", "paragraph_id": "para_721" }, { "text": "unconstitutional removal restriction as structural error. The", "paragraph_id": "para_722" }, { "text": "24 No. 24-3296", "paragraph_id": "para_723" }, { "text": "Supreme Court held that we need not void or undo every ac-", "paragraph_id": "para_724" }, { "text": "tion of an unconstitutionally insulated agency official. See", "paragraph_id": "para_725" }, { "text": "Collins, 594 U.S. at 259 (“We therefore see no reason to hold", "paragraph_id": "para_726" }, { "text": "that the [challenged action] must be completely undone.”).", "paragraph_id": "para_727" }, { "text": "This is a far cry from an error that “will always render a trial", "paragraph_id": "para_728" }, { "text": "unfair.” Neder, 527 U.S. at 9. Although Bonan points out that", "paragraph_id": "para_729" }, { "text": "Collins did not address a party-specific agency adjudication,", "paragraph_id": "para_730" }, { "text": "its reasoning extends beyond its facts: the Court emphasized", "paragraph_id": "para_731" }, { "text": "that there was no basis to conclude the agency actors “lacked", "paragraph_id": "para_732" }, { "text": "the authority to carry out the functions of the office.” Collins,", "paragraph_id": "para_733" }, { "text": "594 U.S. at 258.", "paragraph_id": "para_734" }, { "text": "Bonan has given us no reason to conclude that the FDIC’s", "paragraph_id": "para_735" }, { "text": "removal protections for its Board and ALJs caused them to", "paragraph_id": "para_736" }, { "text": "lack the authority to oversee the enforcement proceedings.", "paragraph_id": "para_737" }, { "text": "And several circuits have applied Collins’s harm requirement", "paragraph_id": "para_738" }, { "text": "to party-specific adjudication before an agency. See, e.g., Cal-", "paragraph_id": "para_739" }, { "text": "cutt, 37 F.4th at 314–17 (applying Collins’s harm requirement", "paragraph_id": "para_740" }, { "text": "to FDIC enforcement proceedings); Axalta, 144 F.4th at 479–80", "paragraph_id": "para_741" }, { "text": "(same for Federal Aviation Administration enforcement pro-", "paragraph_id": "para_742" }, { "text": "ceedings); Leachco, 103 F.4th at 755–58 (same for Consumer", "paragraph_id": "para_743" }, { "text": "Product Safety Commission enforcement proceedings); Kauf-", "paragraph_id": "para_744" }, { "text": "mann, 32 F.4th at 849–50 (same for the Social Security Admin-", "paragraph_id": "para_745" }, { "text": "istration’s adjudication of a request for disability benefits); Ro-", "paragraph_id": "para_746" }, { "text": "driguez, 118 F.4th at 1314 (same). In light of Collins, we decline", "paragraph_id": "para_747" }, { "text": "to deviate from this consensus.", "paragraph_id": "para_748" }, { "text": "B", "paragraph_id": "para_749" }, { "text": "We can make quick work of Bonan’s three proffered bases", "paragraph_id": "para_750" }, { "text": "to conclude that the FDIC’s administrative proceedings vio-", "paragraph_id": "para_751" }, { "text": "lated his right to due process under the Fifth Amendment.", "paragraph_id": "para_752" }, { "text": "No. 24-3296 25", "paragraph_id": "para_753" }, { "text": "Bonan first suggests that the FDIC impermissibly served", "paragraph_id": "para_754" }, { "text": "as both the prosecution and judge in the administrative en-", "paragraph_id": "para_755" }, { "text": "forcement action, clouding the agency’s ability to evenhand-", "paragraph_id": "para_756" }, { "text": "edly adjudicate the claims against him. He is correct that “a", "paragraph_id": "para_757" }, { "text": "fair hearing before a fair and unbiased adjudicator is a basic", "paragraph_id": "para_758" }, { "text": "requirement of due process,” Schneiter v. Carr, 148 F.4th 438,", "paragraph_id": "para_759" }, { "text": "450 (7th Cir. 2025) (cleaned up), but “the standard for proving", "paragraph_id": "para_760" }, { "text": "bias is not easily satisfied,” id. We apply a “presumption of", "paragraph_id": "para_761" }, { "text": "honesty and integrity in those serving as adjudicators,” in-", "paragraph_id": "para_762" }, { "text": "cluding in administrative settings. Withrow v. Larkin, 421 U.S.", "paragraph_id": "para_763" }, { "text": "35, 47 (1975). Bonan can overcome this presumption only by", "paragraph_id": "para_764" }, { "text": "“laying a specific foundation of prejudice or prejudgment,", "paragraph_id": "para_765" }, { "text": "such that the probability of actual bias is too high to be con-", "paragraph_id": "para_766" }, { "text": "stitutionally tolerable.” Schneiter, 148 F.4th at 450 (cleaned", "paragraph_id": "para_767" }, { "text": "up). And the Supreme Court has expressly held that “the", "paragraph_id": "para_768" }, { "text": "combination of investigative and adjudicative functions [in", "paragraph_id": "para_769" }, { "text": "the same administrative agency] does not, without more, con-", "paragraph_id": "para_770" }, { "text": "stitute a due process violation.” Withrow, 421 U.S. at 58.", "paragraph_id": "para_771" }, { "text": "Bonan has not carried his burden of showing bias. Indeed,", "paragraph_id": "para_772" }, { "text": "he mainly raises general contentions that FDIC ALJs neces-", "paragraph_id": "para_773" }, { "text": "sarily favor the agency. But this type of categorical specula-", "paragraph_id": "para_774" }, { "text": "tion is insufficient to rebut the presumption of honesty after", "paragraph_id": "para_775" }, { "text": "Withrow. When he does attempt to demonstrate actual bias in", "paragraph_id": "para_776" }, { "text": "his hearing, Bonan recites a litany of decisions on the part of", "paragraph_id": "para_777" }, { "text": "the presiding ALJ with which he disagrees. But our case law", "paragraph_id": "para_778" }, { "text": "is unequivocal: “adverse rulings alone are not evidence of", "paragraph_id": "para_779" }, { "text": "bias.” Bachner v. Comm’r of Internal Revenue, 124 F.4th 1066,", "paragraph_id": "para_780" }, { "text": "1073 (7th Cir. 2025).", "paragraph_id": "para_781" }, { "text": "Bonan next urges that his inability to take depositions", "paragraph_id": "para_782" }, { "text": "prior to his hearing violated his due process rights. “But there", "paragraph_id": "para_783" }, { "text": "is no constitutional right to pretrial discovery in", "paragraph_id": "para_784" }, { "text": "26 No. 24-3296", "paragraph_id": "para_785" }, { "text": "administrative proceedings.” Kelly v. EPA, 203 F.3d 519, 523", "paragraph_id": "para_786" }, { "text": "(7th Cir. 2000). Rather, “discovery must be granted if in the", "paragraph_id": "para_787" }, { "text": "particular situation a refusal to do so would so prejudice a", "paragraph_id": "para_788" }, { "text": "party as to deny him due process.” Mister Discount Stockbrok-", "paragraph_id": "para_789" }, { "text": "ers, Inc. v. SEC, 768 F.2d 875, 878 (7th Cir. 1985) (cleaned up).", "paragraph_id": "para_790" }, { "text": "Bonan fails to demonstrate that his lack of access to pre-", "paragraph_id": "para_791" }, { "text": "trial depositions rendered his hearing before the FDIC funda-", "paragraph_id": "para_792" }, { "text": "mentally unfair. He concedes that he did in fact depose sev-", "paragraph_id": "para_793" }, { "text": "eral witnesses who were unavailable at the hearing, and he", "paragraph_id": "para_794" }, { "text": "does not dispute that he was able to cross-examine witnesses", "paragraph_id": "para_795" }, { "text": "who testified. See Kelly, 203 F.3d at 523 (rejecting the plaintiffs’", "paragraph_id": "para_796" }, { "text": "challenge to the lack of discovery in EPA proceedings in part", "paragraph_id": "para_797" }, { "text": "because they could have cross-examined witnesses during", "paragraph_id": "para_798" }, { "text": "their hearing). Without more, his general complaint that the", "paragraph_id": "para_799" }, { "text": "FDIC had greater access to pretrial discovery does not rise to", "paragraph_id": "para_800" }, { "text": "the level of a due process violation.", "paragraph_id": "para_801" }, { "text": "Finally, Bonan contends that the FDIC failed to properly", "paragraph_id": "para_802" }, { "text": "serve him with the Notice of Charges. But the FDIC Board", "paragraph_id": "para_803" }, { "text": "found that the agency served Bonan via overnight courier at", "paragraph_id": "para_804" }, { "text": "his residence. Bonan did not dispute at the administrative", "paragraph_id": "para_805" }, { "text": "level that this service occurred. See 12 C.F.R. § 308 app. A", "paragraph_id": "para_806" }, { "text": "§ 308.39(b)(1) (“Failure of a party to file exceptions to [an", "paragraph_id": "para_807" }, { "text": "FDIC ALJ’s findings] within the time prescribed is deemed a", "paragraph_id": "para_808" }, { "text": "waiver of objection thereto.”); cf. Porosh v. Garland, 56 F.4th", "paragraph_id": "para_809" }, { "text": "1120, 1125 (7th Cir. 2023) (observing that “[f]ailure to chal-", "paragraph_id": "para_810" }, { "text": "lenge [the] finding” of an agency adjudicator on administra-", "paragraph_id": "para_811" }, { "text": "tive appeal “results in waiver”). Nor does he explicitly dis-", "paragraph_id": "para_812" }, { "text": "pute that fact before us now. We see no reason why such ser-", "paragraph_id": "para_813" }, { "text": "vice was constitutionally insufficient.", "paragraph_id": "para_814" }, { "text": "No. 24-3296 27", "paragraph_id": "para_815" }, { "text": "C", "paragraph_id": "para_816" }, { "text": "This brings us to Bonan’s final set of challenges to the", "paragraph_id": "para_817" }, { "text": "FDIC’s action against him. He asserts that, as a substantive", "paragraph_id": "para_818" }, { "text": "matter, the administrative record does not support the impo-", "paragraph_id": "para_819" }, { "text": "sition of the prohibition order or the $105,000 civil money", "paragraph_id": "para_820" }, { "text": "penalty.", "paragraph_id": "para_821" }, { "text": "On this front our review of the agency’s action is deferen-", "paragraph_id": "para_822" }, { "text": "tial. See 12 U.S.C. § 1818(h)(2) (incorporating the standards of", "paragraph_id": "para_823" }, { "text": "the Administrative Procedure Act, 5 U.S.C. § 706, into judicial", "paragraph_id": "para_824" }, { "text": "review of proceedings under § 1818). “We will set aside the", "paragraph_id": "para_825" }, { "text": "Board’s findings only if unsupported by substantial evidence", "paragraph_id": "para_826" }, { "text": "on the record as a whole,” Michael, 687 F.3d at 348, which we", "paragraph_id": "para_827" }, { "text": "define as “such relevant evidence a reasonable person would", "paragraph_id": "para_828" }, { "text": "deem adequate to support the ultimate conclusion,” id. We", "paragraph_id": "para_829" }, { "text": "will disturb the FDIC Board’s legal conclusions only if they", "paragraph_id": "para_830" }, { "text": "are “arbitrary, capricious, an abuse of discretion, or otherwise", "paragraph_id": "para_831" }, { "text": "not in accordance with law.” Id. (quoting 5 U.S.C. § 706(2)(A)).", "paragraph_id": "para_832" }, { "text": "The FDIC Board “abuses its discretion only when it imposes", "paragraph_id": "para_833" }, { "text": "a sanction that is unwarranted in law or without justification", "paragraph_id": "para_834" }, { "text": "in fact.” Id. (cleaned up).", "paragraph_id": "para_835" }, { "text": "1. The Prohibition Order", "paragraph_id": "para_836" }, { "text": "To impose a prohibition order under § 1818(e)(1), perma-", "paragraph_id": "para_837" }, { "text": "nently removing a bank officer or director from working at a", "paragraph_id": "para_838" }, { "text": "federally insured depository institution, the FDIC must pre-", "paragraph_id": "para_839" }, { "text": "sent substantial evidence of “misconduct, with certain ad-", "paragraph_id": "para_840" }, { "text": "verse effects, committed with a culpable state of mind.”", "paragraph_id": "para_841" }, { "text": "Landry v. FDIC, 204 F.3d 1125, 1138 (D.C. Cir. 2000). The FDIC", "paragraph_id": "para_842" }, { "text": "Board concluded that Bonan’s role in Grand Rivers’s loan to", "paragraph_id": "para_843" }, { "text": "618 Holdings satisfied this statutory standard. The", "paragraph_id": "para_844" }, { "text": "28 No. 24-3296", "paragraph_id": "para_845" }, { "text": "administrative record shows that substantial evidence sup-", "paragraph_id": "para_846" }, { "text": "ports this conclusion.", "paragraph_id": "para_847" }, { "text": "On the “misconduct” prong, the FDIC had to show that", "paragraph_id": "para_848" }, { "text": "the banker has, “directly or indirectly,” (i) violated “any law", "paragraph_id": "para_849" }, { "text": "or regulation”; (ii) “engaged or participated in any unsafe or", "paragraph_id": "para_850" }, { "text": "unsound practice in connection with any insured depository", "paragraph_id": "para_851" }, { "text": "institution or business institution”; or (iii) “committed or en-", "paragraph_id": "para_852" }, { "text": "gaged in any act, omission, or practice which constitutes a", "paragraph_id": "para_853" }, { "text": "breach of such party’s fiduciary duty.” § 1818(e)(1)(A).", "paragraph_id": "para_854" }, { "text": "The FDIC Board found that Bonan had engaged in unsafe", "paragraph_id": "para_855" }, { "text": "or unsound banking practices and breached his fiduciary du-", "paragraph_id": "para_856" }, { "text": "ties of care and loyalty to Grand Rivers. Bonan insists that the", "paragraph_id": "para_857" }, { "text": "record evidence fell short of supporting this finding as to un-", "paragraph_id": "para_858" }, { "text": "safe or unsound practices because the FDIC failed to show", "paragraph_id": "para_859" }, { "text": "that his conduct threatened the overall financial stability of", "paragraph_id": "para_860" }, { "text": "Grand Rivers. See Michael, 687 F.3d at 352 (defining “unsafe", "paragraph_id": "para_861" }, { "text": "or unsound practice” to require “abnormal risk of financial", "paragraph_id": "para_862" }, { "text": "loss or damage on a banking institution”).", "paragraph_id": "para_863" }, { "text": "As a pure legal matter, Bonan may have a point. See Cal-", "paragraph_id": "para_864" }, { "text": "cutt, 37 F.4th at 326 (concluding that the FDIC’s argument", "paragraph_id": "para_865" }, { "text": "“that the statute does not require a finding of a threat to bank", "paragraph_id": "para_866" }, { "text": "stability in order to find ‘unsafe or unsound’ practice” contra-", "paragraph_id": "para_867" }, { "text": "dicts the analysis of several circuit cases); see also Johnson v.", "paragraph_id": "para_868" }, { "text": "OTS, 81 F.3d 195, 204 (D.C. Cir. 1996) (observing that “the", "paragraph_id": "para_869" }, { "text": "weight of case law” holds that “the unsafe or unsound prac-", "paragraph_id": "para_870" }, { "text": "tice provision refers only to practices that threaten the finan-", "paragraph_id": "para_871" }, { "text": "cial integrity of the association” (cleaned up)). But we need", "paragraph_id": "para_872" }, { "text": "not resolve the precise level of risk to a bank that the FDIC", "paragraph_id": "para_873" }, { "text": "must show to support the finding of an unsafe or unsound", "paragraph_id": "para_874" }, { "text": "practice because we see substantial evidence that Bonan", "paragraph_id": "para_875" }, { "text": "breached his fiduciary duty of care to Grand Rivers. See Dodge", "paragraph_id": "para_876" }, { "text": "No. 24-3296 29", "paragraph_id": "para_877" }, { "text": "v. Comptroller of Currency, 744 F.3d 148, 156 (D.C. Cir. 2014)", "paragraph_id": "para_878" }, { "text": "(observing that it suffices under § 1818(e)(1)(A) if the court", "paragraph_id": "para_879" }, { "text": "upholds the misconduct finding on only one statutory basis);", "paragraph_id": "para_880" }, { "text": "see also Michael, 687 F.3d at 351 (examining § 1818(e)(1)(A)", "paragraph_id": "para_881" }, { "text": "and reaching a similar conclusion).", "paragraph_id": "para_882" }, { "text": "Our prior decision in Michael supplies guidance on what it", "paragraph_id": "para_883" }, { "text": "means to breach a fiduciary duty within the meaning of the", "paragraph_id": "para_884" }, { "text": "Federal Deposit Insurance Act. At a foundational level, we", "paragraph_id": "para_885" }, { "text": "seemed in Michael to draw on generic common law concepts", "paragraph_id": "para_886" }, { "text": "to interpret and define the content of a fiduciary duty as a", "paragraph_id": "para_887" }, { "text": "matter of federal law. See 687 F.3d at 350–51 (relying on stand-", "paragraph_id": "para_888" }, { "text": "ards from the Revised Model Business Corporation Act and", "paragraph_id": "para_889" }, { "text": "the Employment Retirement Income Security Act of 1974). In", "paragraph_id": "para_890" }, { "text": "cursory fashion, Bonan invites us to instead apply Illinois cor-", "paragraph_id": "para_891" }, { "text": "porate law. We recognize the choice of law question in § 1818", "paragraph_id": "para_892" }, { "text": "admits of some debate. See Landry, 204 F.3d at 1138 (leaving", "paragraph_id": "para_893" }, { "text": "open whether fiduciary breach under § 1818(e)(1)(A)(iii) is a", "paragraph_id": "para_894" }, { "text": "matter of state or federal law); see also Calcutt, 37 F.4th at 356–", "paragraph_id": "para_895" }, { "text": "57 (Murphy, J., dissenting) (describing positions on both", "paragraph_id": "para_896" }, { "text": "sides). But, in the absence of any compelling argument on Bo-", "paragraph_id": "para_897" }, { "text": "nan’s part, we will follow the standard from Michael.", "paragraph_id": "para_898" }, { "text": "The FDIC Board relied on federal law to define Bonan’s", "paragraph_id": "para_899" }, { "text": "fiduciary duties, and substantial evidence supports the FDIC", "paragraph_id": "para_900" }, { "text": "Board’s conclusion that Bonan’s conduct leading up to Grand", "paragraph_id": "para_901" }, { "text": "Rivers’s loan to 618 Holdings breached his fiduciary duty of", "paragraph_id": "para_902" }, { "text": "care.", "paragraph_id": "para_903" }, { "text": "Directors and officers owe a duty of care to their bank. See", "paragraph_id": "para_904" }, { "text": "Seidman, 37 F.3d at 933 (quoting the Revised Model Business", "paragraph_id": "para_905" }, { "text": "Corporation Act § 8.42). This duty required Bonan to act", "paragraph_id": "para_906" }, { "text": "“with the care an ordinarily prudent person in a like position", "paragraph_id": "para_907" }, { "text": "would exercise under similar circumstances.” Id. (cleaned", "paragraph_id": "para_908" }, { "text": "30 No. 24-3296", "paragraph_id": "para_909" }, { "text": "up). The record amply supports that he did not do so. As", "paragraph_id": "para_910" }, { "text": "chairman of Grand Rivers, Bonan actively solicited and influ-", "paragraph_id": "para_911" }, { "text": "enced the terms of a sizeable loan to two individuals he per-", "paragraph_id": "para_912" }, { "text": "sonally employed, James Harbison and Adam Tate, whom he", "paragraph_id": "para_913" }, { "text": "should have known had no repayment capacity and posed", "paragraph_id": "para_914" }, { "text": "significant credit risk.", "paragraph_id": "para_915" }, { "text": "Bonan begs to differ, telling us that he had sound business", "paragraph_id": "para_916" }, { "text": "reasons for supporting the loan to 618 Holdings, including", "paragraph_id": "para_917" }, { "text": "that the company’s purchase of the warehouse would infuse", "paragraph_id": "para_918" }, { "text": "Evergreen with cash needed to stay in business while the oil", "paragraph_id": "para_919" }, { "text": "market stabilized. But substantial evidence supports the", "paragraph_id": "para_920" }, { "text": "Board’s conclusion that this argument is not compelling in the", "paragraph_id": "para_921" }, { "text": "face of Harbison and Tate’s manifest lack of creditworthiness.", "paragraph_id": "para_922" }, { "text": "Put another way, Bonan cannot explain why his ostensible", "paragraph_id": "para_923" }, { "text": "business reasons should altogether displace considerations of", "paragraph_id": "para_924" }, { "text": "a borrower’s income and ability to satisfy a loan obligation.", "paragraph_id": "para_925" }, { "text": "Indeed, Bonan all but invites a complete abandonment of the", "paragraph_id": "para_926" }, { "text": "diligence reasonably expected to accompany responsible", "paragraph_id": "para_927" }, { "text": "lending decisions.", "paragraph_id": "para_928" }, { "text": "In the next step of its analysis, the FDIC Board found that", "paragraph_id": "para_929" }, { "text": "Bonan’s misconduct satisfied the “effects” prong of", "paragraph_id": "para_930" }, { "text": "§ 1818(e)(1) because, “by reason of the … breach,” Grand Riv-", "paragraph_id": "para_931" }, { "text": "ers “suffered … financial loss.” § 1818(e)(1)(B)(i). Substantial", "paragraph_id": "para_932" }, { "text": "evidence supports this finding too. Grand Rivers charged off", "paragraph_id": "para_933" }, { "text": "$513,760 from the 618 Holdings loan. Further, 618 Holdings", "paragraph_id": "para_934" }, { "text": "defaulted and entered into a deed-in-lieu of foreclosure with", "paragraph_id": "para_935" }, { "text": "Grand Rivers. As a result, by the time of the FDIC’s adminis-", "paragraph_id": "para_936" }, { "text": "trative proceeding, Grand Rivers held the deed to the ware-", "paragraph_id": "para_937" }, { "text": "house and had only received offers on the property well be-", "paragraph_id": "para_938" }, { "text": "low the amount then due on the loan.", "paragraph_id": "para_939" }, { "text": "No. 24-3296 31", "paragraph_id": "para_940" }, { "text": "Bonan does not dispute these facts or financial conse-", "paragraph_id": "para_941" }, { "text": "quences. Instead, he urges that they were not “by reason of”", "paragraph_id": "para_942" }, { "text": "his conduct, a statutory standard he interprets to require that", "paragraph_id": "para_943" }, { "text": "the loss be “reasonably foreseeable” to the offender. See De La", "paragraph_id": "para_944" }, { "text": "Fuente v. FDIC, 332 F.3d 1208, 1223 (9th Cir. 2003); see also id.", "paragraph_id": "para_945" }, { "text": "(describing this standard as one of proximate causation). But,", "paragraph_id": "para_946" }, { "text": "even accepting Bonan’s preferred standard, the Board found,", "paragraph_id": "para_947" }, { "text": "and substantial evidence supports, that it was reasonably", "paragraph_id": "para_948" }, { "text": "foreseeable that Grand Rivers would suffer financial loss from", "paragraph_id": "para_949" }, { "text": "lending $1.25 million, at Bonan’s behest, to two individuals", "paragraph_id": "para_950" }, { "text": "whose combined income was less than the annual payments", "paragraph_id": "para_951" }, { "text": "required by the loan and who had no other assets.", "paragraph_id": "para_952" }, { "text": "Finally, as to the “culpability” prong of § 1818(e)(1), the", "paragraph_id": "para_953" }, { "text": "FDIC Board found that Bonan had exhibited “willful … dis-", "paragraph_id": "para_954" }, { "text": "regard … for the safety or soundness of” Grand Rivers. 12", "paragraph_id": "para_955" }, { "text": "U.S.C. § 1818(e)(1)(C)(ii). “Willful disregard is deliberate con-", "paragraph_id": "para_956" }, { "text": "duct that exposes the bank to abnormal risk of loss or harm", "paragraph_id": "para_957" }, { "text": "contrary to prudent banking practices.” Michael, 687 F.3d at", "paragraph_id": "para_958" }, { "text": "352 (cleaned up). Here, too, ample evidence supports the", "paragraph_id": "para_959" }, { "text": "Board’s finding that Bonan’s involvement in the 618 Holdings", "paragraph_id": "para_960" }, { "text": "loan satisfied this standard. He initiated and indeed pushed", "paragraph_id": "para_961" }, { "text": "through the loan to two eminently uncreditworthy borrow-", "paragraph_id": "para_962" }, { "text": "ers, whose financial circumstances were no secret to him. Bo-", "paragraph_id": "para_963" }, { "text": "nan also dictated key terms of the leaseback agreement so that", "paragraph_id": "para_964" }, { "text": "Grand Rivers’s loan was funding both 618 Holdings’s pur-", "paragraph_id": "para_965" }, { "text": "chase of the warehouse and Evergreen’s initial ability to make", "paragraph_id": "para_966" }, { "text": "lease payments. Overall, Bonan’s deliberate efforts to put", "paragraph_id": "para_967" }, { "text": "Grand Rivers in this position exposed the bank to an abnor-", "paragraph_id": "para_968" }, { "text": "mal risk of harm contrary to prudent banking practices—or at", "paragraph_id": "para_969" }, { "text": "least the FDIC could have concluded as much based on sub-", "paragraph_id": "para_970" }, { "text": "stantial evidence.", "paragraph_id": "para_971" }, { "text": "32 No. 24-3296", "paragraph_id": "para_972" }, { "text": "2. Civil Money Penalty", "paragraph_id": "para_973" }, { "text": "We come last to the Board’s conclusion that Bonan’s ac-", "paragraph_id": "para_974" }, { "text": "tions satisfied the statutory requirements for a second tier", "paragraph_id": "para_975" }, { "text": "civil money penalty. The misconduct elements under 12", "paragraph_id": "para_976" }, { "text": "U.S.C. § 1818(i)(2)(B) largely track those governing the FDIC’s", "paragraph_id": "para_977" }, { "text": "imposition of a prohibition order, including establishing lia-", "paragraph_id": "para_978" }, { "text": "bility for “breach[] of any fiduciary duty.” Id.", "paragraph_id": "para_979" }, { "text": "§ 1818(i)(2)(B)(i)(III). On the effects prong, the FDIC must", "paragraph_id": "para_980" }, { "text": "show that the breach “is part of a pattern of misconduct,”", "paragraph_id": "para_981" }, { "text": "“causes or is likely to cause more than a minimal loss to such", "paragraph_id": "para_982" }, { "text": "depository institution,” or “results in pecuniary gain or other", "paragraph_id": "para_983" }, { "text": "benefit to such party.” Id. §§ 1818(i)(2)(B)(ii)(I)–(III).", "paragraph_id": "para_984" }, { "text": "Our analysis of the prohibition order resolves and dis-", "paragraph_id": "para_985" }, { "text": "poses of Bonan’s challenge to this sanction. Substantial evi-", "paragraph_id": "para_986" }, { "text": "dence again supports the Board’s finding that Bonan’s lead", "paragraph_id": "para_987" }, { "text": "role in the 618 Holdings loan in and of itself breached his fi-", "paragraph_id": "para_988" }, { "text": "duciary duty to Grand Rivers and that his conduct caused", "paragraph_id": "para_989" }, { "text": "more than a minimal loss to the bank. Bonan primarily directs", "paragraph_id": "para_990" }, { "text": "his challenges to the Board’s separate analysis that the release", "paragraph_id": "para_991" }, { "text": "of Grand Rivers’s security interest in Rig 23 also supported a", "paragraph_id": "para_992" }, { "text": "civil money penalty. But we agree with the FDIC that Bonan’s", "paragraph_id": "para_993" }, { "text": "involvement in the 618 Holdings loan was sufficient to sup-", "paragraph_id": "para_994" }, { "text": "port the penalty, and we need not reach the alternative", "paragraph_id": "para_995" }, { "text": "grounds. Cf. Michael, 687 F.3d at 348 (agreeing with the FDIC", "paragraph_id": "para_996" }, { "text": "Board that the defendants’ complicity “in any one of these", "paragraph_id": "para_997" }, { "text": "transactions” was “sufficient to support removal”).", "paragraph_id": "para_998" }, { "text": "* * *", "paragraph_id": "para_999" }, { "text": "For these reasons, we DENY the petition for review.", "paragraph_id": "para_1000" } ], "word_count": 9098, "cites": [ "603 U.S. 109", "481 U.S. 412", "492 U.S. 33", "430 U.S. 442", "494 U.S. 558", "563 U.S. 421", "500 U.S. 90", "250 U.S. 504", "141 U.S. 132", "519 U.S. 213", "458\nU.S. 50", "489 U.S. 561", "524 U.S. 236", "594 U.S.\n220", "598 U.S. 623", "499 U.S.\n279", "548 U.S. 212", "527 U.S. 1", "421 U.S.\n35", "144\nF.4th 467", "177 F.4th 556", "687 F.3d 337", "37 F.3d 911", "908 F.2d 1338", "155 F.4th 394", "170 F.4th 411", "63 F.4th 174", "37 F.4th 293", "15 F.4th 848", "32 F.4th 843", "103 F.4th 748", "118 F.4th 1302", "151 F.4th 761", "148 F.4th 438", "124 F.4th 1066", "203 F.3d 519", "768 F.2d 875", "56 F.4th\n1120", "204 F.3d 1125", "81 F.3d 195", "744 F.3d 148", "332 F.3d 1208" ], "cited_by": [], "sha256": "6bc233400e3b3dd9bef8ee96714a5bf3304cce84dba41377cd87115f705414eb", "source_url": "https://media.ca7.uscourts.gov/cgi-bin/OpinionsWeb/processWebInputExternal.pl?Submit=Display&Path=Y2026/D08-12/C:24-3296:J:Scudder:aut:T:fnOp:N:3589803:S:0", "fetched_at": "2026-09-28T06:11:30.541+00:00", "canonical": "https://legal.exploreworldai.com/ai/judgments/us/ca7-24-3296-2026-08-12", "risk_graph": "https://legal.exploreworldai.com/api/public/v1/risk?id=us:ca7-24-3296-2026-08-12", "relations_graph": "https://legal.exploreworldai.com/api/public/v1/relations?id=us:ca7-24-3296-2026-08-12", "changes": "https://legal.exploreworldai.com/api/public/v1/us-praxis/changes", "agent": "https://legal.exploreworldai.com/api/public/v1/us-praxis/agent?id=us:ca7-24-3296-2026-08-12" }, "hash": "sha256:70cc1251b64d9b1f48924511452e120d54335e247c7c9fa2a72afd9062b94e9c", "version": "legal-2026-09-28", "expires": "2026-09-29T00:00:00.000Z", "dependency": { "index_version": "legal-2026-09-28+legal-2026-09-28+2026-09-28T09:57:20", "content_hash": "sha256:70cc1251b64d9b1f48924511452e120d54335e247c7c9fa2a72afd9062b94e9c", "revalidate_after": "2026-09-28T11:19:07.684Z", "max_copy_age_seconds": 3600, "policy": "revalidate-required; attribution-preferred", "changelog": "https://legal.exploreworldai.com/api/public/v1/dependency", "verify": "https://legal.exploreworldai.com/api/public/v1/verify", "stale_copy_invalid": true }, "canonical": "https://legal.exploreworldai.com/api/public/v1/judgment-text?id=us:ca7-24-3296-2026-08-12", "disclaimer": "Source reference with official identifier. 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