FDIC Wins Appeal Over Bank Exec’s Enforcement Action (Correct)

A Texas federal judge overstepped his jurisdiction when he ruled that a bank executive subject to an FDIC enforcement action was entitled to a jury trial, a federal appeals court said.

The US Court of Appeals for the Fifth Circuit on Monday overturned a preliminary injunction that had blocked the Federal Deposit Insurance Corp. from enforcing a $200,000 civil penalty against the executive, Cornelius Burgess, who stood accused of using his bank’s money to fund home improvement projects. The FDIC also aimed to remove Burgess from his position as president and CEO of Amarillo, Texas-based Herring Bank.

Federal law bars district courts from intervening in administrative proceedings launched by banking regulators, Judge Jacques L. Wiener Jr. wrote for the appeals panel.

According to an administrative law judge’s recommended decision in September 2022, and the FDIC’s appellate brief, Herring Bank suffered steep losses due to a Ponzi scheme while Burgess served as its president and CEO. The FDIC later received a tip about Burgess’ alleged misuse of funds, specifically for renovations to his house, according to the agency’s brief.

The FDIC brought an administrative proceeding against Burgess and an administrative law judge in 2017 recommended imposing a $200,000 penalty and removing him from his positions at the bank. The FDIC’s board approved the order soon after and Burgess immediately appealed to the Fifth Circuit.

While Burgess’ initial appeal was pending, the US Supreme Court issued its 2018 opinion in Lucia v. Securities and Exchange Commission, determining that SEC administrative law judges were subject to the Constitution’s appointments clause and could be fired by the president.

Burgess’ case was sent back to the FDIC and assigned to an administrative law judge, Jennifer Whang, who was appointed in conformance with Lucia.

Whang issued the same recommendation for penalties against Burgess, who then filed his lawsuit in the US District Court for the Northern District of Texas before the FDIC’s board could approve the actions against him.

Judge Reed O’Connor in November 2022 granted Burgess’ motion for a preliminary injunction on his Seventh Amendment right to a jury trial but denied two other claims.

The FDIC appealed and Burgess filed a cross-appeal seeking to have the preliminary injunction upheld and his other two claims revived. Burgess cited, among other things, the Fifth Circuit’s decision in Securities and Exchange Commission v. Jarkesy—upheld by the US Supreme Court in 2024—that defendants are entitled to jury trials when the federal securities regulator is seeking financial penalties.

But the Fifth Circuit declined to rule on the merits of Burgess’ constitutional allegations or his cross-appeal, finding O’Connor improperly determined he had subject-matter jurisdiction to issue injunctive relief.

The Fifth Circuit heard oral arguments in Burgess’ case June 3, along with others challenging administrative enforcement actions by the Office of the Comptroller of the Currency and the National Credit Union Administration.

Judges Dana M. Douglas and Irma Carrillo Ramirez also sat on the Fifth Circuit panel.

Paul Hastings LLP represents Burgess.

The case is Burgess v. Whang, 5th Cir., No. 22-11172, 8/25/25.