FDIC enforcement
Bonan v. FDIC
Date: Aug. 12, 2026
Issue: Whether the FDIC’s in-house adjudication of an enforcement action seeking a prohibition order and civil money penalty against Frank Bonan violated his Seventh Amendment right to a jury trial.
Case Summary: In a unanimous decision, a Seventh Circuit panel ruled that the FDIC did not violate the Seventh Amendment by adjudicating an enforcement action seeking a prohibition order and civil money penalty.
As background, in Atlas Roofing Co. v. Occupational Safety & Health Review Commission, the U.S. Supreme Court announced a broad rule allowing agencies to adjudicate federal statutory violations in-house. Atlas Roofing recognized that Congress has broad authority to create public rights by establishing new statutory causes of action designed to address national problems. However, the Supreme Court narrowed its reach in SEC v. Jarkesy. Jarkesy held that the SEC violated the Seventh Amendment by using its in-house adjudicatory process to impose civil money penalties for securities fraud claims that were analogous to common-law fraud.
In May 2021, the FDIC initiated an administrative enforcement action against Frank Bonan. Bonan chaired Grand Rivers Community Bank’s board, served on its loan committee, and held senior roles at People’s National Bank. The FDIC based its case on two transactions involving troubled borrower Evergreen Drilling. According to the FDIC, Bonan helped arrange a $1.26 million Grand Rivers loan to 618 Holdings, formed by two of his employees, to buy Evergreen’s warehouse and lease it back to the company. FDIC examiners later classified the loan as substandard, and Grand Rivers charged off $500,000 after default. Grand Rivers mistakenly released its security interest in Evergreen’s Rig 23 and later accepted a lower-priority lien, resulting in another $489,268 charge-off. The FDIC alleged that Bonan engaged in unsafe or unsound banking practices and breached his fiduciary duties, and it sought an industry ban and civil money penalty.
In January 2023, an FDIC administrative law judge recommended sanctions after finding that Bonan engaged in professional misconduct. Bonan filed exceptions to the recommended decision. In December 2024, the FDIC board ruled that Bonan pushed through the financially unsound 618 Holdings loan, which supported a prohibition order under Section 1818(e) of the Federal Deposit Insurance Act (FDIA) and a $105,000 second-tier civil money penalty under Section 1818(i)(2)(B). The FDIC board also determined that Bonan’s conduct involving the Rig 23 release, including pressuring subordinates into making the mistake, supported a separate $105,000 civil money penalty. As in Jarkesy, Bonan sought review based on the Seventh Amendment, while also alleging other constitutional violations.
On appeal, the panel denied Bonan’s petition. First, the panel ruled the FDIC’s in-house enforcement action did not violate Bonan’s Seventh Amendment right to a jury trial. Applying the two-step inquiry from Jarkesy, the Seventh Circuit resolved the first step easily, concluding the FDIC’s action implicated the Seventh Amendment because a civil penalty is “the prototypical common law remedy.”
At the second step, the court asked whether the FDIC’s statutory claims were analogous to suits at common law — and therefore concerned private rights, requiring a jury trial — but also added a new gloss concerning the time period to be examined. Reading Jarkesy to require comparison to the common law as it existed at the founding of the United States, rather than at some later time, the court found no founding-era cause of action that “target[ed] the same conduct or operate[d] under similar legal principles.” Each of the FDIC’s claims therefore concerned public rights, and the agency’s in-house adjudication did not violate the Seventh Amendment.
Although the panel called Bonan’s Seventh Amendment claim a “close and challenging call,” it concluded that Jarkesy left Atlas Roofing intact for statutory causes of action that do not resemble traditional common-law suits. Therefore, the panel ruled that Congress could assign the FDIC’s claims to an agency for adjudication without a jury.
Second, the panel rejected Bonan’s argument that the FDIC board and its administrative law judges were unconstitutionally insulated from presidential oversight. Bonan argued that statutory limits on the president’s removal power violated Article II and required the court to vacate the FDIC’s orders. Relying on the U.S. Supreme Court’s ruling in Collins v. Yellen, the panel explained that Bonan had to show that the removal restrictions caused him compensable harm. The panel concluded that Bonan had only speculated that the president might have removed FDIC officials without those protections and had not shown the restrictions affected the enforcement proceeding against him. The panel also rejected his claim that the removal restrictions created structural error requiring automatic reversal. It explained that Collins does not require courts to void every action taken by an official who has unconstitutional removal protection. Because Bonan failed to show that the restrictions affected the FDIC’s decision or stripped its officials of authority, the panel declined to vacate the orders.
Third, the panel rejected Bonan’s three due process claims under the Fifth Amendment. First, it rejected his argument that the FDIC improperly acted as both prosecutor and judge. The panel ruled that Bonan failed to overcome the presumption that administrative adjudicators act with honesty and integrity. His general claims of bias and disagreement with the ALJ’s rulings did not show actual prejudice. Second, the panel rejected his claim that the FDIC violated due process by limiting prehearing depositions. The panel explained that parties have no constitutional right to pretrial discovery in administrative proceedings and ruled that Bonan failed to show that the limits made his hearing unfair. Bonan deposed unavailable witnesses and cross-examined those who testified. Finally, the panel rejected his claim that the FDIC failed to properly serve a Notice of Charges. The panel noted that the agency served Bonan by overnight courier at his residence and that he did not dispute that service during the administrative proceedings.
Finally, the panel rejected Bonan’s challenges to the FDIC’s prohibition order and civil money penalty. The panel concluded that substantial evidence showed that Bonan breached his fiduciary duty of care by pushing through the 618 Holdings loan despite the borrowers’ lack of repayment capacity and the loan’s significant credit risk. The panel also determined that Bonan’s conduct caused Grand Rivers financial loss and showed willful disregard for the bank’s safety and soundness.
Because Bonan’s role in the 618 Holdings loan supported the prohibition order, the panel upheld that sanction. It also upheld the second-tier civil money penalty, concluding that Bonan’s breach of fiduciary duty caused more than a minimal loss to Grand Rivers. The panel therefore did not address the FDIC’s alternative basis for the penalty involving the Rig 23 collateral release.
Bottom Line: The Seventh Circuit ruled the FDIC’s in-house adjudication of an enforcement action did not violate the Seventh Amendment right to a jury trial.
Document: Opinion
