In-House proceedings
Ortega v. Office of the Comptroller of the Currency
Date: Sept. 8, 2025
Issue: Whether the OCC’s in-house enforcement actions violate the Seventh Amendment and conflict with the U.S. Supreme Court’s Jarkesy decision.
Case Summary: In a unanimous decision, a Fifth Circuit panel upheld industry bans and $250,000 fines against former bank executives, ruling that the OCC’s in-house proceedings did not violate their Seventh Amendment jury trial rights even after the U.S. Supreme Court’s decision in SEC v. Jarkesy.
In Jarkesy, the U.S. Supreme Court upheld a Fifth Circuit decision that concluded the SEC’s use of its in-house judicial forum unconstitutional under the Seventh Amendment when imposing CMPs.
Former First National Bank executives Saul Ortega and David Rogers, Jr. (petitioners) were held liable by the OCC for misconduct related to the bank’s collapse in 2013, following a $174 million loss on Fannie Mae and Freddie Mac investments. Despite OCC directives and a 2011 consent order aimed at strengthening capital and correcting unsafe practices, First National Bank remained “critically undercapitalized” and was closed in September 2013.
On Sept. 25, 2017, the OCC issued a Notice of Charges, alleging unsafe or unsound practices, breaches of fiduciary duty, and material misstatements. After a 12-day hearing, ALJ Jennifer Whang recommended penalties but declined to impose an industry ban for the petitioners’ capital-raising strategy. But the OCC overruled her and imposed lifetime prohibitions and $250,000 civil penalties each for lending and accounting misconduct. The petitioners appealed the OCC’s decision.
On appeal, the panel concluded the OCC’s enforcement action did not violate the petitioners’ Seventh Amendment right. The petitioners argued that under Jarkesy, they were entitled to a jury trial before civil penalties could be imposed. The petitioners stressed that the OCC’s monetary penalties resembled the kind of private-rights claims, such as fraud, that Jarkesy held must be tried in Article III courts with a jury. The Fifth Circuit began its analysis by applying Jarkesy’s two-step framework: whether the claims implicate the Seventh Amendment and, if so, whether the public rights doctrine applies to take them outside the jury-trial guarantee.
The panel explained that Jarkesy did not apply to the OCC’s enforcement action because banking regulation falls within the public rights doctrine, which allows the government to resolve disputes involving public rights through non-Article III adjudicators, such as administrative agencies or legislative courts. In Jarkesy, the SEC pursued anti-fraud penalties in-house even though fraud has long been a common-law cause of action traditionally decided in courts of law. By contrast, the OCC acted under the Federal Deposit Insurance Act (FDIA) to enforce the safety and soundness of federally chartered banks — institutions Congress created to serve national purposes, including maintaining a uniform currency and protecting deposit insurance.
The panel emphasized this distinction matters because Congress, not the judiciary, designed the national banking system and entrusted its oversight to the legislative and executive branches. The panel pointed to the National Bank Act of 1864, the creation of the Federal Reserve, and the establishment of the FDIC as evidence of this long and unbroken regulatory tradition. Because OCC enforcement does not simply regulate private transactions, as in Jarkesy’s securities fraud context, but safeguards the broader financial system, the Fifth Circuit concluded the public rights exception applies.
As a result, the petitioners had no constitutional right to a jury trial. In short, the panel held that Jarkesy does not extend to federal banking enforcement, and the OCC acted within its authority in adjudicating the case administratively.
Additionally, the panel considered five other issues on appeal: (i) the validity of ALJ Whang’s appointment; (ii) whether the statute of limitations barred the OCC’s enforcement action; (iii) whether trial evidentiary rulings were proper; (iv) whether substantial evidence supported the Comptroller’s prohibition order; and (v) whether a stricter evidentiary standard should apply to prohibition orders.
Addressing these issues, the panel held that ALJ Whang was validly appointed by Treasury Secretary Mnuchin under Lucia v. SEC and rejected related discovery claims. It also ruled the OCC’s action was timely under 28 U.S.C. § 2462 because petitioners continued filing inaccurate Call Reports through 2013. The panel also found no reversible evidentiary errors and concluded that substantial evidence supported the OCC’s prohibition order despite the ALJ’s contrary recommendation. Finally, the panel concluded the preponderance of the evidence standard — not clear and convincing evidence — governs prohibition proceedings under the FDIA.
Bottom Line: The Fifth Circuit concluded that Jarkesy does not apply to the OCC’s statutory scheme under 12 U.S.C. § 1818 and upheld the OCC’s ability to seek civil penalties.
Document: Opinion
