The Federal Deposit Insurance Corporation (FDIC) has a supervisory role over the state-charted banks it insures. Cornelius Burgess, a bank CEO, was investigated for allegedly using bank funds for personal expenses, and an administrative law judge (ALJ) ordered that Burgess not be allowed to work in the banking industry and issued a fine. In response, Burgess sued in the Northern District of Texas, arguing that the Seventh Amendment required the court to invalidate the FDIC’s supervision power. The District Court for the Northern District of Texas granted Burgess a preliminary injunction, blocking the proceeding against him, and the FDIC appealed. The Constitutional Accountability Center filed a brief in the Fifth Circuit in support of the FDIC. 

In SEC v. Jarkesy, the Supreme Court held that when the Securities Exchange Commission (SEC) seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial. But the Court made clear that there are “some contexts” in which what the Court has called the “public rights doctrine” applies, and in those contexts, the government may seek traditional legal remedies and civil penalties in administrative tribunals. Our brief explains why the public rights doctrine applies here. 

Congress can assign adjudication of claims to executive agencies when they are operating in an area of exclusive congressional control, and where regulated parties enjoy no vested right to participate. As the Court explained in Jarkesy, “public rights” concern matters that historically could have been determined exclusively by the executive and legislative branches. Put another way, the public rights doctrine applies when Congress’s power in an area is so total that no party has a “vested right” to act in that area without Congress’s approval. 

Here, Burgess’s bank voluntarily participated in the FDIC’s regulatory program, and no vested rights are involved. The FDIC’s supervisory powers stem from the unique relationship between the federal government and the banking system, which performs important public functions. The FDI Act represented a “deal” between banks and the federal government. Banks would enjoy the benefit of insurance protection, while the FDIC would be entitled to protect federal insurance funds with regulatory scrutiny. Indeed, Congress gave the FDIC the specific adjudicatory powers at issue in this case to ensure the agency could curb unsafe banking practices.   

As this history makes clear, the distribution of deposit insurance and regulation of federally insured banks is an area in which the power of the political branches is long-standing and has traditionally been exclusive, making the public rights doctrine applicable. No court has ever held that the Seventh Amendment is implicated in this context, and the Fifth Circuit should not do so either.