Court Reinstates Challenge to OCC Enforcement Action

By Chris Bruce

July 12 — A federal appeals court July 12 gave a former banking lawyer another chance to claim bank regulators retaliated against him by bringing a trumped-up enforcement action ( Loumiet v. United States, D.C. Cir., No. 15-cv-05208, 7/12/16 ).

The ruling by the U.S. Court of Appeals for the District of Columbia gives new life to claims by Carlos Loumiet against the Office of the Comptroller of the Currency (OCC) under the Federal Tort Claims Act (FTCA). Loumiet said a 2006 OCC enforcement action against him arose after he made allegations against OCC employees to the Treasury Department's Inspector General.

A district court dismissed his claims, saying in part that Loumiet's allegations focused on enforcement matters that were tied to agency discretion.

The D.C. Circuit disagreed, saying the statute doesn't automatically foreclose claims that allege unconstitutional conduct.

“We conclude, in line with the majority of our sister circuits to have considered the question, that the discretionary-function exception does not categorically bar FTCA tort claims where the challenged exercise of discretion allegedly exceeded the government’s constitutional authority to act,” Judge Cornelia T. L. Pillard said for a three-judge panel.

A former government official who asked not to be identified told Bloomberg BNA that the decision may act as a brake on some enforcement actions.

The former official also said a split among the circuits means the U.S. Supreme Court will likely address the FTCA's discretionary-function exception in the context of constitutional claims, even if it doesn't in this particular case.

Court's First Ruling

The decision is the first by the D.C. Circuit on whether the FTCA’s discretionary-function exception generally immunizes allegedly unconstitutional abuses of discretion by the government.

According to Pillard, at least seven other circuits — the First, Second, Third, Fourth, Fifth, Eighth and Ninth — have held directly or otherwise said that the discretionary-function exception doesn't shield government officials if they exceed the scope of their authority under the U.S. Constitution.

Only the Seventh Circuit has held otherwise, Pillard said.

The ruling doesn't mean the OCC acted unlawfully. It sends the case back to the district court to decide whether Loumiet’s lawsuit “plausibly alleges” conduct by the OCC that would exceed the scope of its constitutional authority.

The OCC did not immediately respond to a request for comment July 12.

Loumiet is a partner in the Miami office of Broad and Cassel and a member of the firm's corporate and securities practice group. A person who answered the phone at the firm July 12 said Loumiet is traveling abroad.

Latest Setback

The decision marks the latest setback for the OCC in connection with the Loumiet case. After the OCC brought its enforcement action against him in 2006, an administrative law judge (ALJ) recommended dismissal of the action. John C. Dugan, who headed the OCC at the time, agreed that dismissal was appropriate but disagreed with much of the ALJ's reasoning.

An ALJ also denied Loumiet's request for payment of his legal fees, but the D.C. Circuit reversed that ruling in 2011, saying he was entitled under the Equal Access to Justice Act.

The case arose in connection with an OCC securities fraud investigation of a bank. According to the court, Loumiet, who was on a team of attorneys hired to prepare an audit report, sent letters to the Treasury Department's Inspector General alleging racist remarks by some OCC employees against bank staffers.

The OCC later closed the bank, citing unsafe operations, then took enforcement action against Loumiet in 2006 under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). The OCC said Loumiet, as an institution-affiliated party, breached his duties during the investigation and harmed the bank.

Probe Sparks Case

Loumiet sued the government in 2012, asserting common-law tort claims under the FTCA for intentional infliction of emotional distress, invasion of privacy, abuse of process, malicious prosecution, negligent supervision and civil conspiracy.

He also filed Bivens claims — named for a 1971 U.S. Supreme Court decision — against individual officials, saying they violated his First and Fifth Amendment rights, and were “driven by a desire to retaliate” against him.

The district court dismissed the Bivens claims, saying they were brought too late, but the D.C. Circuit reversed, saying Loumiet alleged continuing harm from the OCC's actions.

To contact the reporter on this story: Chris Bruce in Washington at

To contact the editor responsible for this story: Mike Ferullo at

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