Courts Have No Power Over FDIC Administrative Cases, Judge Says

The Federal Deposit Insurance Corp. fended off a challenge to a proposed $20.4 million judgment against a Kansas bank after a judge ruled he didn’t have the authority to stop an agency administrative proceeding.

Federal courts can’t grant preliminary injunctions seeking to stop FDIC administrative proceedings, as CBW Bank requested, and they lack the authority to rule on the constitutionality of the agency’s use of administrative law judges, Judge Daniel Crabtree of the US District Court for the District of Kansas said in a Monday decision.

“By statute, Congress explicitly has precluded district court jurisdiction over FDIC enforcement proceedings, except in specified circumstances—neither of which apply here,” Crabtree said.

“We’re disappointed that the district court did not stand up to the FDIC’s unconstitutional, bureaucratic overreach. We look forward to continuing to vigorously contest these baseless charges,” a CBW spokesperson said.

The FDIC didn’t immediately responded to requests for comment.

Weir, Kan.-based CBW sued the FDIC in November, arguing that an agency administrative proceeding over alleged anti-money laundering failures violated the bank’s right to a jury trial under the Seventh Amendment.

The FDIC alleged that CBW ran a multibillion-dollar international money-transmitting business without adequate anti-money laundering and counterterrorism protections in place. The bank repatriated millions of dollars in bulk cash shipments from Mexico, the FDIC said, despite concerns such shipments are often associated with money laundering tied to drug trafficking.

The FDIC initially defended the use of administrative law judges in its proceedings against CBW, but changed its position once the Trump administration took over.

The agency in a Feb. 24 court filing said it would no longer defend its use of in-house judges in the CBW case following new guidance from the Justice Department finding that “multiple layers of removal restrictions” for the judges are unconstitutional.

But the FDIC planned to continue to pursue its case against the bank because it said CBW “has not shown that absent the removal protections, the ‘ALJ would have been removed or the proceedings would be different,’ the FDIC said.

The US Supreme Court held in a 6-3 decision last June in Securities and Exchange Commission v. Jarkesy that defendants in agency enforcement actions have the right to a jury trial when facing financial penalties.

But Crabtree said that ruling didn’t apply to the CBW case because Congress specifically blocked federal courts from taking on challenges to FDIC administrative cases under the Federal Deposit Insurance Act.

CBW Bank is represented by Morgan, Lewis & Bockius LLP and Berkowitz Oliver.

The case is CBW Bank v. FDIC, D. Kan., No. 2:24-cv-02535, Memorandum and Order 3/3/25.