Scott v. Federal Deposit Insurance Corp.
684 F. App'x 391
5th Cir.2017Background
- FDIC initiated action against G. Harrison Scott, Johnny Crow, and Sharry Scott (bank directors/institution‑affiliated parties) for Regulation O violations based on loans and fee handling at the Bank of Louisiana.
- Director K received a $75,000 interest‑only loan in Oct 2009 despite chronic delinquencies, outdated/pledged collateral appraisals, and questionable cash flow; loan was renewed in July 2010 with continued delinquencies.
- Officer P was a vice president who was not excluded by board resolution or bylaws from policymaking; the bank failed to charge him overdraft fees twice and later made a >$100,000 loan to him secured by a second mortgage.
- FDIC moved for partial summary disposition; ALJ granted it as to liability and held a hearing on penalties, recommending $10,000 CMP per respondent; the FDIC Board adopted that recommendation.
- Petitioners sought review, arguing lack of substantial evidence for Regulation O violations, that Officer P was not an "executive officer," that CMPs were an abuse of discretion, and that the ALJ improperly resolved facts at summary stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether loans to Director K involved more than the normal risk of repayment under Regulation O | Petitioners: collateral value and eventual repayment show normal risk | FDIC: borrower's chronic delinquencies, inadequate cash flow, outdated/pledged appraisals made risk above normal | Court: Liability affirmed; objective‑lender analysis supports FDIC—no genuine dispute of material fact |
| Whether Officer P is an "executive officer" under Regulation O | Petitioners: declarations that P did not participate in major policymaking | FDIC: P was a vice president and not excluded by resolution/bylaws, so category presumes executive officer status | Court: P is an executive officer as defined; Petitioners conceded liability if so |
| Whether $10,000 CMPs were an abuse of discretion or arbitrary and capricious | Petitioners: penalties excessive given circumstances | FDIC: ALJ considered statutory mitigating factors and 13‑factor interagency policy; respondents could pay | Court: CMPs within statutory range and properly considered; not an abuse of discretion |
| Whether ALJ improperly resolved contested facts at summary disposition | Petitioners: ALJ disregarded evidence, made credibility calls, and ignored post‑close evidence | FDIC: Petitioners failed to produce evidence creating a genuine dispute and could not raise new evidence after close | Court: ALJ did not err; summary disposition appropriate and post‑close evidence not considered |
Key Cases Cited
- Bullion v. FDIC, 881 F.2d 1368 (5th Cir. 1989) (objective‑lender test for "more than normal risk" and key factors to assess repayment risk)
- Lowe v. FDIC, 958 F.2d 1526 (11th Cir. 1992) (FDIC authority to impose civil money penalties on directors)
- Grubb v. FDIC, 34 F.3d 956 (10th Cir. 1994) (definition of substantial evidence review)
- Abbott v. Equity Group, Inc., 2 F.3d 613 (5th Cir. 1993) (summary disposition reviewed like summary judgment)