Opposition Brief — Donohoo v. United States

No. 00-1889

~!

Iu the Supreme Court of the Guited States

RICHARD D. DONOHOO, PETITIONER

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

THEODORE B. OLSON

Solicitor General

Counsel of Record

STUART E. SCHIFFER

Acting Assistant Attorney

General

JACOB M. LEWIS

SANDRA WIEN SIMON

Attorneys

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

QUESTION PRESENTED

Whether the five-year statute of limitations on this

action to collect an unpaid civil monetary penalty

imposed under the Federal Deposit Insurance Act, 12

U.S.C. 1818(i)(2), began to run at the time of the

conduct that led to the imposition of the penalty, or not

until (at the earliest) the time of the final administra-

tive decision imposing the penalty.

(I)

TABLE OF CONTENTS

Page

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PUI diieicstisctiphinninintapiecicuinkedilb bite tates seh es 5

ee No OR AREY ETE ed RASA! Ce eT 10

TABLE OF AUTHORITIES

Cases:

Adams v. Woods, 6 U.S. (2 Cranch) 336 (9805) ................ 7

Bay Area Laundry & Dry Cleaning Penswon Trust

Fund v. Ferbar Corp. of Cal., Inc., 522°U.S. 192

STOP sinsastiicdiatcinaatigiiainicisheatiaddadactiataniiad oes hs ae 6

Crown Coat Front Co. v. United States, 386 U.S.

OD ieiseiprttinteailelidinsniidelea idled ase ga to 9

Donohoo v. FDIC, 522 U.S. 821 (1997) cececcccccceeesoecc---., 4

Donohoo, In re, 243 B.R. 139 (M.D. Fla. ee 6

Lindquist & Vennum v. FDIC, 103 F.3d 1409

PIG TOD cence ec i 3

Reiter v. Cooper, 507 U.S. 258 (1998) coeccccccccccccsssescssseecoseee. 7

3M Co. v. Browner, 17 F.3d 1453 (D.C. Cir. 1994) 7

Unexcelled Chem. Corp. v. United States, 345 U.S.

ce i TIO LD TROT Soe STN EN ATT 8,9

United States v. Core Labs., Inc., 759 F.2d 480 (5th

Py I site aanelcetiigaet eels es oll 4,8,9

United States v. McIntyre, 779 F. Supp. 119 (S.D.

EN ANON LOS TA 5

United States v. Meyer, 808 F.2d 912 (1st Cir.

SPIT lecithin i 4,9

Statutes:

Change in Bank Control Act of 1978, 12 U.S.C.

1817) (1994 & Supp. V 1999) ......eccccccscesssescecssessesssseeseseee 3

(IIT)

I a a a ell seh a a ask

IV

Statutes—Continued: Page

Export Administration Act of 1979, 50 U.S.C. App.

NS TODD, icin. cicienninsicsieninnctiinntdhinniaiinnemnahainmanmciniathiohe 4,8

Be ie Fe. BAIS vnesnceticinsiccnintistisiesiniinniionennnninaiaiti 9

Fair Credit Reporting Act, 15 U.S.C. 1681 et seq. ..........0.. 10

Federal Deposit Insurance Act, 12 U.S.C. 1811 et seq. ..... 1

I rene I rcsctiseiniiicnschinntenisthesiiesesiaieiiehalsioedbibintnieicne 2

ee SEE deicitnntninienieihendlanibibeinibiaidiiahiniisiciine 2,6

Re Se SEED seehsecshcesisoinccitneisepliebiininecialeaitininicbanitbanen 2

Se Rees EE certain schcitndaenasaettaienatiandaiaitedantinctis 4

Ee Sic SD heist cietiserneiceniasnnsinie 2,4, 5,6, 7,9

eT BE Ciiinitniseiictisereticiincteraeniitiniiainiin 2

RE UE Ei, BE ei seiesennsicigi anititcictinetansncnnnnisintinns 2,6

ae Rene SNOMED: aiinincikiciestsinnciininnsscacindasesannncanine 2,6

BEE AEA SD eiinacieacecicptisccapesniancicsertnerntnasaisentoss 9

12 U.S.C. 1818()(2)(1)(i) ........... saiialanilicbisiaansiaiweiai 2,4,6,7,9

12 U.S.C. 1818()(2)(T)(ii) ....... saihnabiatibbiasiahtansinisacmiatelait 2,9

Portal-to-Portal Act of 1947, 29 U.S.C. 255 oo. ceseeees 8

Walsh-Healy Act, 41 U.S.C. 35 et sq. ..........scscscssscsssssssesereees 8

SP aks SE vaiiiiniennnesitienttninlninncctiainiadaneniinnaiaiii 2, 4, 5, 8, 9, 10

Jn the Supreme Court of the United States

No. 00-1889

RICHARD D. DONOHOO, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. A1l-A9)

is reported at 232 F.3d 637. The order of the district

court (Pet. Supp. App. Al1-A12) is unreported.

JURISDICTION

The judgment of the court of appeals was entered

on November 15, 2000. A petition for rehearing was

denied on January 29, 2001 (Pet. App. A10). The peti-

tion for a writ of certiorari was filed on April 30, 2001 (a

Monday). The jurisdiction of this Court is invoked

under 28 U.S.C. 1254(1).

STATEMENT

1. The Federal Deposit Insurance Act (the Act), 12

U.S.C. 1811 et seqg., authorizes the Federal Deposit

(1)

2

Insurance Corporation (FDIC) and other federal bank

regulatory agencies to impose civil monetary penalties

on any insured depository institution or “institution-

affiliated party” that “violates any law or regulation.”

12 U.S.C. 1818(i)(2); see 12 U.S.C. 1813(q) (defining “ap-

propriate Federal banking agency”). A penalty so

imposed is to be “assessed and collected” by written

notice. 12 U.S.C. 1818(i)(2)(E)(i). If the party assessed

does not request an agency hearing within 20 days after

the notice of assessment is issued, the assessment be-

comes a “final and unappealable order.” 12 U.S.C.

1818(i)(2)(E)(ii) and (H).

If the assessed party requests a hearing, the banking

agency must hold the hearing and then, “within ninety

days after [it] has notified the parties that the case has

been submitted to it for final decision, * * * render its

decision * * * and * * * issue and serve upon each

party to the proceeding an order or orders consistent

with the provisions of (the Act].” 12 U.S.C. 1818(h)(1);

see 12 U.S.C. 1818(i)(2)(H). Any party to the admini-

strative proceeding may seek judicial review of the

agency’s order in the court of appeals for the circuit in

which the home office of the depository institution is

located, or in the District of Columbia Circuit. 12

U.S.C. 1818(h)(2). The judgment of the court of appeals

“shall be final” unless this Court grants a petition for

certiorari. 12 U.S.C. 1818(h)(2).

If a party “fails to pay an assessment after any pen-

alty assessed under [the Act] has become final, the

agency that imposed the penalty shall recover the

amount assessed by action in the appropriate United

States district court.” 12 U.S.C. 1818(i)(2)(D(i). In such

a collection action, “the validity and appropriateness of

the penalty shall not be subject to review.” 12 U.S.C.

1818(i)(2)(1)(ii). Under 28 U.S.C. 2462, “[e]xcept as

3

otherwise provided by Act of Congress, an action, suit

or proceeding for the enforcement of any civil fine,

penalty, or forfeiture, pecuniary or otherwise, shall not

be entertained unless commenced within five years

from the date when the claim first accrued if, within the

same period, the offender or the property is found

within the United States in order that proper service

may be made thereon.”

2. Petitioner was an officer, director and share-

holder of Capital Bank, a federally insured depository

institution. In July 1990, petitioner and others ar-

ranged for the issuance, sale and purchase of new

shares of the bank without prior regulatory approval, in

violation of the Change in Bank Control Act of 1978, 12

U.S.C. 1817(j) (1994 & Supp. V 1999). See Pet. App.

A2; Lindquist & Vennum v. FDIC, 103 F.3d 1409, 1412-

1413 (8th Cir. 1997). Petitioner also engaged in a

variety of other improper transactions involving the

bank. See Lindquist & Vennum, 103 F.3d at 1413-1417.

On the basis of petitioner’s actions, in September 1992

the FDIC assessed civil penalties against him in the

amount of $1,000,554. Pet. App. A2-A3.

Petitioner appealed the assessment, and an admini-

strative hearing was held in April and May of 1993.

Pet. App. A3. The administrative law judge issued his

Recommended Decision in September 1994. Jbid. The

FDIC’s Board of Governors reviewed and modified that

decision, and in September 1995 issued its own decision,

also ordering petitioner to pay $1,000,554. Jbid.

Petitioner sought review of that order in the court of

appeals, which affirmed assessment of the penalty on

January 8, 1997. Lindquist & Vennum, 103 F.3d at

1418-1419. Petitioner then sought review by this

Court, but the Court denied his petition for a writ of

4

certiorari on October 6, 1997. Donohoo v. FDIC, 522

US. 821.

2. Petitioner did not pay the amount assessed. In

November 1998, the FDIC brought the present action

to enforce the penalty. Pet. App. A3. The district court j

granted summary judgment for the government. Pet. 1

Supp. App. Al-A13. The court rejected, without dis- \

cussion, petitioner’s argument that the action was

barred by the statute of limitations. Jd. at A7-A8.

The court of appeals affirmed. Pet. App. Al-A9. The

court rejected petitioner’s argument that the FDIC’s

claim for payment of the civil penalties “first accrued,”

for purposes of the statute of limitations in 28 U.S.C.

2462, on the date of the violation for which the penalty

was ultimately assessed. See Pet. App. A5, A8. The

court noted that the Fifth Circuit had accepted a simi-

lar argument in applying Section 2462 to a suit to collect

a civil penalty imposed under the Export Administra-

tion Act of 1979, 50 U.S.C. App. 2401 et seq., but that

the First Circuit had held that because the Export

Administration Act provided an administrative pro-

cedure for the assessment of penalties, the statute of

limitations on a collection action would not begin to run

until the penalty had been assessed. Pet. App. A5-A7

(discussing United States v. Meyer, 808 F.2d 912 (1st

Cir. 1987), and United States v. Core Labs., Inc., 759

F.2d 480 (5th Cir. 1985)).

The court observed that under 12 U.S.C. 1818(i), an H

agency may not bring a collection action “until the i

defendant ‘fails to pay an assessment after any penalty

imposed under [Section 1818(i)(2)] has become final.’”

Pet. App. A9 (quoting 12 U.S.C. 1818()(2)(D(i)).. Thus,

“the government is precluded from bringing an

enforcement action until the penalty has been finalized

through administrative proceedings.” Jbid. With that

5

constraint, the court pointed out, “[uJnder the Fifth

Circuit’s rule [running the statute of limitations from

the time of the original violation], the government could

find itself unable to collect on a penalty simply because

those proceedings have taken too long.” Jbid. The

court rejected that result, reasoning that “(a] violator

should not be able to escape paying a penalty by

dragging his feet through the administrative penalty-

assessment process.” Jbid. The court instead found the

First Circuit’s reasoning more persuasive, and held

that “where an Act which authorizes the assessment of

a civil penalty also provides for an administrative

procedure for assessing that penalty, the statute of

limitations period set out in § 2462 will not begin to run

until that administrative process has resulted in a final

determination.” Jd. at A8.'

ARGUMENT

1. Under 28 U.S.C. 2642, an action for the enforce-

ment of a federal civil penalty must be commenced

“within five years from the date when the claim first

accrued.” But a claim for the enforcement of such a

penalty does not “accrue” until, at a minimum, the per-

son on whom it is imposed has come under a legal

obligation to pay it. When a banking agency assesses a

penalty under 12 U.S.C. 1818(i)(2), the party assessed

has the right to an administrative hearing. If such a

hearing is requested, the administrative order imposing

the penalty becomes final and enforceable, at the earli-

1 The court found it unnecessary to decide whether the admini-

strative decision became “final” before judicial review was com-

plete. In this case, the court noted, “[bJoth the date that the final

administrative order was entered, and the date the Supreme Court

denied review are within five years of the date the government

initiated” the collection action. Pet. App. A8-A9 n.3.

est, only once the agency has held the hearing and

rendered its “final decision.” See 12 U.S.C. 1818(h)(1),

(1)(2)(E)(ii) and (H). The agency may seek judicial

enforcement of the penalty only “{iJf any * * * person

fails to pay an assessment after any penalty assessed

* * * has become final.” 12 U.S.C. 1818(i)(2)(I)(i).

Accordingly, the claim for such enforcement does not

accrue before the penalty has become final and the

agency may legally demand payment. See United

States v. McIntyre, 779 F. Supp. 119, 122 (S.D. Iowa

1991); In re Donohoo, 243 B.R. 139, 142 (M.D. Fla.

1999); cf., e.g., Bay Area Laundry & Dry Cleaning Pen-

sion Trust Fund v. Ferbar Corp. of Cal., Inc., 522 U.S.

192, 201-202 (1997) (pension plan’s claim against with-

drawing employer did not accrue until plan set schedule

of withdrawai payments and employer failed to pay;

“standard rule” is that “the limitations period com-

mences when the plaintiff has ‘a complete and present

cause of action,’” and generally “a cause of action does

not become ‘complete and present’ for limitations

purposes until the plaintiff can file suit and obtain

relief”) (citation omitted).’

Petitioner argues (Pet. 10-11) that a claim to enforce

a civil penalty imposed under Section 1818(i)(2) should

accrue at the time of the underlying banking-law vio-

lation, or at the time the agency makes its initial ad-

2 As the court of appeals explained (Pet. App. A8-A9 n.3), there

is no need to decide in this case precisely when a penalty under

Section 1818(i)(2) becomes “final” for purposes of collection, or

when a claim for judicial enforcement accrues. The penalty might

become final at the time of the final administrative decision, or only

after the decision has been sustained on judicial review or the time

for seeking further review has expired. The claim for enforcement

might accrue when the penalty becomes final, or only after the

assessed party has refused to honor a proper demand for payment.

7

ministrative assessment of the penalty. Such a rule

would make no sense. First, the “claim” for enforce-

ment is entirely inchoate until the agency makes its

initial decision to assess a penalty of a particular

amount. Second, even at that time, the propriety and

amount of the assessment remain subject to further

agency proceedings at the behest of the assessed party,

and an enforcement action may not be brought until the

administrative assessment “has become final.” 12

U.S.C. 1818(i)(2)(D(i). As the court of appeals

observed, a rule under which the time for judicial en-

forcement began to run before the commencement of

administrative proceedings (or at the time such

proceedings were first commenced) would produce an

incentive for the assessed party “to delay the

[administrative] process as much as possible” (Pet.

App. A7), and would lead to a situation in which “the

government could find itself unable to collect on a

penalty simply because [the administrative] proceed-

ings have taken too long” (id. at A9). That would not be

a sensible result. Cf. Reiter v. Cooper, 507 U.S. 258, 267

(1993) (“While it is theoretically possible for a statute to

create a cause of action that accrues at one time for the

purpose of calculating when the statute of limitations

begins to run, but at another time for the purpose of

bringing suit, we will not infer such an odd result in the

absence of any such indication in the statute.”).

Petitioner protests that postponing accrual until the

cause of action for enforcement is ripe will result in

individuals “remain[ing] for ever liable to a pecuniary

forfeiture.” Pet. 6 (quoting 3M Co. v. Browner, 17 F.3d

1453, 1457 (D.C. Cir. 1994), in turn quoting Adams v.

Woods, 6 U.S. (2 Cranch) 336, 341 (1805)). But the

question is not whether judicial enforcement of a

penalty imposed under Section 1818(i)(2) is subject to

8

any period of limitation. Whether the claim for judicial

enforcement accrues when the administrative assess-

ment becomes final, when judicial review has con-

cluded, or when the assessed party has failed to make a

properly demanded payment, the time for such enforce-

ment is specifically limited by Section 2462.

In this. case, as petitioner explains (Pet. 3-4, 6), peti-

tioner violated the Act in 1990. The FDIC made its

initial penalty assessment in 1992, held a hearing in

1993, and issued its interim decision in 1994 and its final

decision in 1995. The judicial review pursued by peti-

tioner was completed in October 1997, when this Court

denied review of the Eighth Circuit’s decision sus-

taining the administrative order. Petitioner did not pay

the penalty, and the FDIC brought this enforcement

action in 1998. The collection suit was therefore timely

under any proper construction of when the claim for

enforcement accrued, and there is no substance to

petitioner’ s fears (Pet. 6-7) of administrative delay or

“perpetu(al]” liability.

2. Petitioner contends (Pet. 5-9) that the decision of

the court of appeals conflicts with Unexcelled Chemical

Corp. v. United States, 345 U.S. 59, 73 (1953), and

United States v. Core Laboratories, Inc., 759 F.2d 480

(5th Cir. 1985). Unexcelled Chemical involved a suit to

collect “liquidated damages” under the Walsh-Healy

Act, 41 U.S.C. 35 et seg., and held that the two-year

statute of limitations in the Portal-to-Portal Act of

1947, 29 U.S.C. 255, had begun to run at the time of the

underlying violation. See 345 U.S. at 65. Core Labora-

tories held that for purposes of Section 2462, a claim for

collection of sanctions imposed under the antiboycott

provisions of the Export Administration Act of 1979, 50

U.S.C. App. 2401 et seg., accrued at the time of the-

sanctionable conduct.

9

In Unexcelled Chemical, the Court emphasized that

the Attorney General was authorized to bring suit to

collect the liquidated damages without regard to the

pendency of administrative proceedings before the

Secretary of Labor. 345 U.S. at 65-66. In this case, by

contrast, 12 U.S.C. 1818(i)(2)(D(i) expressly precluded

the FDIC from bringing suit to collect a penalty as-

sessed under Section 1818(i)(2) until the penalty “ha[d]

become final.” Here, therefore, awaiting the outcome of

the administrative proceedings was a necessary pre-

requisite to suit, not simply a matter of “judicial admini-

Stration.” 345 U.S. at 46; see also Crown Coat Front

Co. v. United States, 386 U.S. 503, 519 (1967) (distin-

guishing Unexcelled Chemical); United States v.

Meyer, 808 F.2d 912, 917 (1st Cir. 1987) (same).

In Core Laboratories, the Fifth Circuit emphasized

that each statute must be examined on its own terms

for purposes of construing the applicable statute of

limitations. 759 F.2d at 481-482 (citing Crown Coat

Front, 386 U.S. at 517). In applying Section 2462 in the

context of the Export Administration Act, the court

relied, in significant part, on legislative history indi-

cating that Congress specifically intended the five-year

limitation period to apply to administrative as well as to

judicial proceedings, and to run from the time of the act

giving rise to the liability. Jd. at 482. Petitioner points

to no evidence of congressional intent that the period

of limitations for a collection action under Section

1818(i)(2)(I) should run from the time of the violation.

Moreover, the Export Administration Act provides

that in an action brought to recover a civil penalty “the

court shall determine de novo all issues necessary

to the establishment of liability,” 50 U.S.C. App. 2410(f),

whereas in a collection action under Section 1818(i)(2)

(I)(ii), “the validity and appropriateness of the penalty

10

shall not be subject to [judicial] review.” There are,

accordingly, material differences between the pro-

visions at issue in Core Laboratories and in this case,

and there is no reason to assume that the Fifth Circuit

would disagree with the decision below.*

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

THEODORE B. OLSON

Solicitor General

STUART E. SCHIFFER

Acting Assistant Attorney

General

JACOB M. LEWIS

SANDRA WIEN SIMON

Attorneys

AUGUST 2001

3 For the same reason, there is no need to consider in this case

the conflict between Core Laboratories and the First Circuit’s

more recent (and better reasoned) decision in Meyer, which

reached a different conclusion concerning the application of Section

2462 to suits for collection of sanctions imposed under the Export

Administration Act. See Pet. App. A6-A7. Nor is there any rea-

son to hold this case pending the Court’s consideration of TRW

Inc. v. Andrews, No. 00-1045, which involves whether a “discovery

rule” applies in determining when the limitation period begins to

run for consumer actions under the Fair Credit Reporting Act,

15 U.S.C. 1681 et seqg., or National Railroad Passenger Corp. v.

Morgan, No. 00-1614, which presents a question concerning the

“continuing violation” doctrine in the context of federal anti-dis-

crimination statutes. The questions at issue in those cases are

quite distinct from the question petitioner seeks to present.