Source: https://law.justia.com/cases/federal/appellate-courts/F2/968/164/98723/
Timestamp: 2020-07-10 01:08:23
Document Index: 450852555

Matched Legal Cases: ['§ 554', '§ 1818', '§ 1818', '§ 706', '§ 371', '§ 371']

A. Frederick Greenberg; Richard M. Greenberg, Petitioners, v. the Board of Governors of the Federal Reserve System, Respondent, 968 F.2d 164 (2d Cir. 1992) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Second Circuit › 1992 › A. Frederick Greenberg; Richard M. Greenberg, Petitioners, v. the Board of Governors of the Federal...
A. Frederick Greenberg; Richard M. Greenberg, Petitioners, v. the Board of Governors of the Federal Reserve System, Respondent, 968 F.2d 164 (2d Cir. 1992)
U.S. Court of Appeals for the Second Circuit - 968 F.2d 164 (2d Cir. 1992) Argued April 22, 1992. Decided June 19, 1992
Shortly before the trial, the Greenbergs' counsel discovered that the ALJ's former law clerk had previously worked for the OCC and had participated in that agency's investigation of the Greenbergs. The Greenbergs thereupon requested that the ALJ recuse himself. The ALJ refused to do so. The ALJ explained that he had not known that the law clerk had previously participated in the Greenberg investigation and noted that the law clerk had worked for the judge for only six weeks "during the course of which he did some administrative things for me with regard to this case, but he had no substantive input." The ALJ assured the Greenbergs that the law clerk "ha [d] not said to me one word concerning any previous involvement in this case, nor said anything about the bank or the people involved." Accordingly, the ALJ concluded that there was no need to recuse himself. The Greenbergs did not investigate the matter further. On this petition for review, however, the Greenbergs assert that the participation by the ALJ's law clerk in the underlying investigation biased the entire administrative proceeding.
Instead, we think the Greenbergs' charge must be judged under the standards imposed on ALJs by the Administrative Procedure Act (APA), 5 U.S.C. § 554(d). That section requires that " [a]n employee or agent engaged in the performance of investigative or prosecuting functions for an agency in a case may not, in that or a factually related case, participate or advise in the decision...."
The APA is violated only where an individual actually participates in a single case as both a prosecutor and an adjudicator. Ministerial participation in one function will not disqualify the actor from more substantial participation in the other function. See Finer Foods Sales Co., Inc. v. Block, 708 F.2d 774, 779 (D.C. Cir. 1983) (signing a reparations order a ministerial act, not the performance of a prosecutorial function, since signing "did not require the Judicial Officer to exercise any discretion or make any legal or factual judgments."); Shultz v. Securities and Exchange Com'n, 614 F.2d 561, 569 (7th Cir. 1980) (no violation of APA where the agency prosecutor drafted the notice of decision for the agency, because the decision had been made by judges without any input from the prosecutor).
The uncontroverted facts in this case lead to the conclusion that the law clerk played only a ministerial role in the adjudicatory process. The ALJ stated that the law clerk had not spoken to the ALJ about the underlying investigation and had performed only administrative tasks in the case. The Greenbergs had the burden of establishing that the law clerk played a more significant role in the decision. See Grolier Inc. v. FTC, 615 F.2d 1215, 1221 (9th Cir. 1980). The Greenbergs failed to present any facts that would contradict the ALJ's version of events. Indeed, the record does not indicate that the Greenbergs even attempted to depose the law clerk. Since the ALJ's version remains effectively unchallenged, we hold that there was no violation of the APA.
As a final resort, the Greenbergs assert that the law clerk's participation in both the adjudicative and prosecutorial processes created such a risk of an unfair decision as to violate due process. We agree that a due process violation may be established without a showing of actual bias where "a court ... determin [es] from the special facts and circumstances present in the case before it that the risk of unfairness is intolerably high." Withrow v. Larkin, 421 U.S. 35, 58, 95 S. Ct. 1456, 1470, 43 L. Ed. 2d 712 (1975). However, the simple "combination of investigative and adjudicative functions does not, without more, constitute a due process violation." Id.
In Withrow, the Court approved an arrangement whereby the state medical board both brought and adjudicated charges against wayward physicians. The Court reasoned that the adjudicators were entitled to a presumption of honesty. Id. at 47, 95 S. Ct. at 1464. Absent specific evidence to the contrary, the Court was confident that the mixture of functions would not create "a sufficiently great possibility that the adjudicators would be so psychologically wedded to their complaints that they would consciously or unconsciously avoid the appearance of having erred or changed position." Id. at 57, 95 S. Ct. at 1469. Here, where the former prosecutor (the law clerk) had no decisional authority, but at most might have advised the decision maker, the risk of impropriety was not as high as that tolerated by the Court in Withrow. Accordingly, we reject the Greenbergs' due process challenge.
The Greenbergs argue that prior OCC enforcement actions against them and the Bank bar this removal action. This claim has been before us once before. In Greenberg v. Comptroller of the Currency, 938 F.2d 8 (2d Cir. 1991), the Greenbergs sought to enjoin the OCC action that resulted in the orders of prohibition at issue here. As one ground of attack, the Greenbergs asserted the preclusive effect of the prior enforcement proceedings. We declined to entertain the claim then, reasoning that the better course was to await the outcome of the OCC investigation, since "a judicial determination as to whether any issues in the current OCC proceedings have been settled in prior proceedings would require a comparison of the facts and transactions underlying both the prior and the current proceedings, a comparison that best can be made in the first instance by the OCC itself." Id. at 12. The OCC has now made that comparison. In the opinion recommending an order of prohibition, the ALJ ruled that " [n]one of the violations alleged here were at issue in the prior cases." We agree with the ALJ's conclusions, and therefore reject the Greenbergs' preclusion claim.
The doctrine of res judicata, or claim preclusion, provides that a final judgment on the merits in one action bars subsequent relitigation of the same claim by the same parties and by those in privity with the parties. N.L.R.B. v. United Technologies Corp., 706 F.2d 1254, 1259 (2d Cir. 1983). That bar extends both to "issues actually decided in determining the claim asserted in the first action and [to] issues that could have been raised in the adjudication of that claim." Id. at 1259. However, preclusion is limited to the transaction at issue in the first action. Litigation over other transactions, though involving the same parties and similar facts and legal issues, is not precluded. Id. at 1259-60.
Res judicata applies to judgments by courts and by administrative agencies acting in an adjudicative capacity. United States v. Utah Construction & Mining Co., 384 U.S. 394, 422, 86 S. Ct. 1545, 1560, 16 L. Ed. 2d 642 (1966). Settlements may also have preclusive effect. May v. Parker-Abbott Transfer and Storage Inc., 899 F.2d 1007, 1009 (10th Cir. 1990). The preclusive effect of a settlement is measured by the intent of the parties to the settlement. Id. at 1010-11.
There are two flaws in this argument. First, to the extent that the June 15 letter should be treated as a settlement, it can only have the preclusive affect that the parties to the settlement intended to give it. See May, 899 F.2d at 1010-11; United States v. Burns, 512 F. Supp. 916, 921 (W.D. Pa. 1981). The June 15 letter states that "this decision does not affect further possible administrative action...." Thus, the parties intended that the letter have no preclusive affect. Second, to the extent we consider the letter a unilateral ruling by the OCC, such unilateral administrative action has no res judicata affect. See International Harvester Co. v. OSHRC, 628 F.2d 982, 984-86 (7th Cir. 1980). Accordingly, the letter of reprimand does not bar this prohibition proceeding.
Finally, the Greenbergs point to a settlement entered into by the OCC and the bank on August 10, 1988, and amended on May 31, 1989, in which the Bank agreed to cease and desist from loaning money to limited partnerships controlled by the Greenbergs. The August 10 consent order clearly does not preclude this action. That order contained a paragraph expressly reserving the right of the OCC to "undertake any action affecting the B [ank]" (emphasis added) and providing that "nothing in this [order] shall in any way inhibit, stop, bar, or otherwise prevent the [comptroller] from so doing."
We need not reach this question, however, because the Greenbergs have not demonstrated that any transaction included in the notices are also at issue here. Since the Greenbergs bear the burden of establishing res judicata, American Fed. of Gov't Employees, Council 214, AFL-CIO v. Federal Labor Relations Authority, 835 F.2d 1458, 1463 (D.C. Cir. 1987), their failure to precisely identify which transactions considered here were also the subject of the 1988 settlement defeats their res judicata claim. Accordingly, we conclude that the Board properly determined that the prior enforcement actions did not bar this prohibition proceeding.
The Greenbergs also challenge the Board's decision on the merits. Under 12 U.S.C. § 1818, the OCC may seek an order prohibiting a person affiliated with a regulated bank from participating in the banking industry upon a showing that the person (1) committed a violation; (2) that the violation caused either losses to the bank or financial gain to the perpetrator; and (3) that the violation involved either personal dishonesty or willful or continuing disregard for the safety and soundness of the bank. Id. § 1818(e) (1).
The Board found that the Greenbergs violated restrictions on loans to affiliates and on insider loans by making loans to limited partnerships controlled by the Greenbergs. The Board then concluded that the Greenbergs benefitted from these transactions by gaining the use of funds for partnerships within their control. Finally, the Board found personal dishonesty in the Greenbergs willful failure to disclose to the Bank the Greenbergs' interests in several of the limited partnerships receiving loans. Our review of the factual determinations of the Board is limited to examining whether the findings are supported by substantial evidence. 5 U.S.C. § 706(2) (E). We review the legal determinations de novo.
As to the partnerships, 12 U.S.C. § 371c(b) (1) defines an affiliate of a bank to include any company controlled by the individuals who also control the bank. § 371c(b) (1) (C) (i). The Greenbergs acknowledge that they control the bank. They deny, however, control over certain limited partnerships for which they were the general partners but owned only a small equity stake in the partnership.
Section 371c(b) (3) (A) defines control to include ownership of "25 [%] or more of any class of voting securities" of a company. The Board concluded that as the general partners of a limited partnership, the Greenbergs were in a position analogous to the sole owners of a class of securities within the limited partnership. Accordingly, the Board found that the Greenbergs controlled the limited partnerships, even though they owned only a small stake in these partnerships.