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Denaples v. Office of the Comptroller of the Currency

February 4, 2010

LOUIS A. DENAPLES PLAINTIFF
v.
OFFICE OF THE COMPTROLLER OF THE CURRENCY DEFENDANT



The opinion of the court was delivered by: Thomas I. Vanaskie United States District Judge

(JUDGE VANASKIE)

MEMORANDUM

Louis A. DeNaples has brought this action for declaratory and injunctive relief to challenge action of the Office of the Comptroller of the Currency ("OCC") that he claims was taken in the absence of statutory authority and was arbitrary, capricious, and an abuse of discretion. Specifically, Mr. DeNaples asserts that the OCC wrongfully determined that he had entered into a "pretrial diversion program or similar program" in connection with the dismissal of perjury charges, thereby making it unlawful for him to resume his position as Chairman of the Board of Directors of First National Community Bank (the "Bank") by virtue of the proscription set forth in 12 U.S.C. § 1829(a)(1).*fn1 The OCC has moved for dismissal of this action for lack of subject matter jurisdiction. Having concluded that this Court's adjudication of Mr. DeNaples' claims would affect the exercise of authority delegated to the OCC in 12 U.S.C. § 1818, a result foreclosed by Congress in 12 U.S.C. § 1818(i)(1), I will grant the motion to dismiss.

I. BACKGROUND

Plaintiff joined the Bank's Board of Directors in 1972 and served on the Board for over thirty-five (35) years, becoming Chairman in 1988. (Complaint, Dkt. 1, at ¶ 3.) On January 23, 2008, a grand jury in Dauphin County, Pennsylvania, recommended that the District Attorney institute criminal proceedings against Plaintiff for perjury. (Id. at ¶ 15.) On January 30, 2008, the Dauphin County District Attorney's Office filed a criminal complaint against Plaintiff that charged him with four counts of perjury. (Id. at ¶ 16.) "The charges involved testimony that Mr. DeNaples provided to the Pennsylvania Gaming Control Board in 2006 in the course of obtaining a gaming license for Mt. Airy, No. 1, LLC ("Mount Airy Casino"), which was solely owned by Mr. DeNaples at the time." (Id. at ¶ 17.)

On February 6, 2008, Plaintiff voluntarily took a leave of absence from his duties as Chairman of the Board at the Bank. (Id. at ¶ 19.) On February 8, 2008, two days later, the OCC issued a Notice of Suspension pursuant to 12 U.S.C. § 1818(g)(1) "that prohibited Mr. DeNaples from participating in the conduct of the affairs of the Bank or any other FDIC-insured depository institution."*fn2 (Id. at ¶ 20.) Plaintiff "complied with the suspension and did not contest it." (Id. at ¶ 21.)

During the course of negotiations regarding the disposition of the charges against him, Plaintiff's counsel made it clear to the District Attorney that he would under no circumstances agree to a disposition of the charges that would require entry into a pretrial diversion or similar program. (Id. at ¶ 22.) On April 15, 2009, the District Attorney's Office and Plaintiff executed an "Agreement for Withdrawal of Charges" in which the District Attorney agreed to withdraw all charges and Plaintiff agreed to take certain action. (Id. at ¶ 23.) Plaintiff alleges that an OCC representative was informed by a prosecutor from the District Attorney's Office that the agreement to resolve the charges did not constitute a pretrial diversion or similar program. (Id. at ¶ 28.) By Order dated April 16, 2009, the Court of Common Pleas of Dauphin County entered a Nolle Prosequi in Mr. DeNaples' case, thereby effecting a dismissal of the charges.*fn3

(Id. at ¶ 24.)

On April 17, 2009, the OCC Director of Enforcement and Compliance wrote to Mr. DeNaples to inform him that the OCC "ha[d] become aware of your pretrial diversion agreement," and that he was "subject to the prohibitions set forth in 12 U.S.C. § 1829 . . . ."*fn4 (Apr. 17, 2009 Letter, Dkt. 21-3, at 1.) The letter further provided that a knowing violation of § 1829 would subject Mr. DeNaples and the Bank to the penalties provided in the statute, i.e., a fine of up to $1,000,000 per day and/or a term of imprisonment of up to five (5) years. 12 U.S.C. § 1829(b). That letter was forwarded to the Bank's counsel. An OCC representative informed the Bank's counsel that "Mr. DeNaples was 'immediately prohibited from further service' at the Bank and warned that 'the statute provides substantial penalties against both Mr. DeNaples, as well as the bank, for any violation of this provision.'"*fn5 (Id. at ¶ 30.)

Mr. DeNaples' counsel responded to the April 17, 2009, OCC letter on June 8, 2009, asserting that the agreement to resolve the charges did not constitute a "pretrial diversion or similar program." (June 8, 2009 Letter, Dkt. 37-7.) The letter from Mr. DeNaples' counsel was accompanied by a legal opinion from a Pennsylvanian lawyer who wrote that the Agreement "was not, in any form, an ARD or pretrial diversion under State law." (Donato Letter, Dkt. 18-4, at 51.) In response, on July 14, 2009, the OCC Director of Enforcement and Compliance sent a letter confirming that the OCC had determined that the agreement was a pretrial diversion or similar program and reiterating that Mr. DeNaples was permanently barred from service at the Bank. (Id. at ¶ 32.) The letter also instructed Mr. DeNaples that he "must take immediate steps to inform the Board of Directors that he may no longer serve in any capacity [at] the Bank, and indicate that his absence is permanent rather than temporary in nature." (July 14, 2009 Letter, Dkt. 21-5, at 6.)

Plaintiff filed this action on September 17, 2009. Plaintiff asserts that jurisdiction lies in this Court pursuant to 28 U.S.C. § 1331, the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701-706, and the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202. (Complaint, Dkt. 1, at ¶ 6.) Plaintiff seeks a declaration that the agreement effecting the dismissal of the perjury charges "does not constitute a 'pretrial diversion or similar program' under Section 19" of the Financial Institutions Supervisory Act ("FISA"), 12 U.S.C. § 1829, so that "Section 19's lifetime prohibition is not triggered by the Agreement." (Id. at ¶¶ 40, 42.) Plaintiff also requests that the OCC letters of April 17 and July 14, 2009 "be held unlawful and set aside pursuant to 5 U.S.C. 706." (Id. at ¶ 46.)

On November 20, 2009, Plaintiff filed a Motion for Preliminary Injunction or Final Adjudication on the Merits. (Dkt. 16.) On November 24, 2009, the OCC, acting pursuant to 12 U.S.C. § 1818(b), issued a "NOTICE OF CHARGES" in support of a cease and desist order. (Notice of Charges, Dkt. 37-9, at 2.) The Notice charges that Mr. DeNaples has violated, is violating, or has threatened to continue violating . . . 12 U.S.C. § 1829, by failing to resign his position as Chairman of the Board and Director of the Bank, following [his] agreement to enter into a pretrial diversion or similar program to resolve criminal charges that involved dishonesty or breach of trust. (Id. at 2-3.) The next day, on November 25, 2009, the OCC filed a Motion to Dismiss the Complaint for Lack of Subject Matter Jurisdiction. (Dkt. 20.) Oral argument on the Motion to Dismiss was held on January 29, 2009.

II. DISCUSSION

A party seeking affirmative relief in federal court bears the burden of establishing that the court has jurisdiction over the subject matter of the claim. Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991). Plaintiff seeks relief under the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, and the APA, 5 U.S.C. §§ 701-706. Plaintiff acknowledges that the Declaratory Judgment Act is not an independent source of federal court jurisdiction. (Opp. Br., Dkt. 36, at 20 n.9.) He asserts, however, that this Court can declare whether the agreement that resolved the state court prosecution constitutes a pretrial diversion or similar program because he has asserted a claim under the APA, a federal statute that brings this matter under the congressional delegation of subject matter jurisdiction for civil actions arising under the laws of the United States. See 28 U.S.C. § 1331. The OCC, while not disputing that this matter would otherwise fall within this Court's federal question jurisdiction under 28 U.S.C. § 1331, argues that Congress withdrew the authority of United States District Courts over this kind of dispute by providing in section 8 of FISA that "except as otherwise provided in this section . . . no court shall have jurisdiction to affect by injunction or otherwise the issuance or enforcement of any notice or order under ...


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