United States v. Richard D. Donohoo ( 2000 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 00-1601
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United States of America, *
*
Plaintiff-Appellee, * Appeal from the United States
* District Court for the
v. * District of Minnesota
*
Cheryl C. Godbout-Bandal; Bruce *
A. Rasmussen; Wayne Field; *
*
Defendants, *
* [Published]
Richard D. Donohoo, *
*
Defendant-Appellant. *
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Submitted: October 20, 2000
Filed: November 15, 2000
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Before HANSEN, MURPHY, and BYE, Circuit Judges.
___________
BYE, Circuit Judge.
The district court1 granted summary judgment to the federal government on its
1
The Honorable Richard H. Kyle, United States District Judge for the District
of Minnesota.
claim for enforcement of an award of civil penalties against defendants for violation of
the Change in Bank Control Act, 12 U.S.C. § 1817(j). Defendant Richard D. Donohoo
(Donohoo) appeals on the single issue of whether the applicable five-year statute of
limitations bars the government’s claim. We affirm.
I.
In July, 1990, Donohoo and the other defendants, officers of Capital Bank,
inserted $1,000,000 in cash into that institution during the banking crisis, in order to
meet the bank’s capital requirements. The investment allowed Capital Bank to weather
the crisis; but, as it turned out, Donohoo and his cohorts violated the Change in Bank
Control Act when they made their investment without first obtaining approval from the
Federal Deposit Insurance Corporation (FDIC). See Lindquist & Vennum v. Federal
Deposit Ins. Corp., 103 F.3d 1409, 1413-14 (8th Cir. 1997).
The exact details of Donohoo’s transgressions are unimportant for purposes of
this appeal; however, the following chronology is relevant. In September 1992, the
FDIC assessed civil penalties against Donohoo in the amount of $1,000,554.00 for his
July, 1990, violation. Donohoo appealed the assessment, and an administrative hearing
was held before an administrative law judge (ALJ) in April-May, 1993. In September,
1994, the ALJ issued his Recommended Decision. The FDIC Board of Governors
modified the ALJ’s decision, and in September, 1995, issued its own decision ordering
Donohoo to pay $1,000,554.00. Donohoo appealed the administrative decision to this
court; we affirmed the penalty assessment on January 8, 1997. See id. Donohoo then
sought a writ of certiorari from the Supreme Court, which was denied on October 6,
1997. See Donohoo v. Federal Deposit Ins. Corp., 522 U.S. 821 (1997).
In November, 1998, more than eight years after the commission of the act for
which the penalty was assessed, the FDIC commenced this action to enforce the
penalty pursuant to 12 U.S.C. § 1818(i). The district court granted the government’s
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motion for summary judgment on December 20, 1999, rejecting without discussion
Donohoo’s argument that the government could not collect on the debt because the
statute of limitations set forth in 28 U.S.C. § 2462 had run.
II.
Donohoo seeks review of only one issue: whether the district court erred in
implicitly finding that the government’s claim against him is not barred by the statute
of limitations. We review the district court's grant of summary judgment de novo. See
Lynn v. Deaconess Med. Ctr.-West Campus, 160 F.3d 484, 486 (8th Cir. 1998).
The government proceeds against Donohoo pursuant to § 1818(i)(1) which
allows the “appropriate Federal banking agency” to seek “enforcement of any effective
and outstanding notice or order issued under this section” in district court. This
statutory provision is not equipped with its own statute of limitations; thus, the general
statute of limitations for collection of civil penalties, 28 U.S.C. § 2462, applies.
Section 2462 states as follows:
Except as otherwise provided by Act of Congress, an action, suit or
proceeding for the enforcement of any civil fine, penalty, or forfeiture,
pecuniary or otherwise, shall not be entertained unless commenced within
five years from the date when the claim first accrued if, within the same
period, the offender or the property is found within the United States in
order that proper service may be made thereon.
28 U.S.C. § 2462.
Donohoo argues that the government’s claim for enforcement of the penalties
assessed against him by the FDIC is barred by this statute. He asks us to interpret the
phrase “claim first accrued” to mean the date of the original violation for which the
penalty was assessed, i.e., July, 1990. The government, in contrast, argues that the
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claim does not accrue until the administrative proceedings assessing the penalties are
completed.
This question appears to be a matter of first impression in our circuit. The
circuits are split on when a claim accrues under this statute of limitations. The Fifth
Circuit favors Donohoo’s approach. See United States v. Core Labs. Inc., 759 F.2d
480 (5th Cir. 1985). The Core court analyzed caselaw arising under the various
predecessors to § 2462 and found that “[a] review of these cases clearly demonstrates
that the date of the underlying violation has been accepted without question as the date
when the claim first accrued, and, therefore, as the date on which the statute began to
run.” Id. at 482. The court also found support for its position in the legislative history
of the Export Administration Act, 50 U.S.C. App. § 2401, the Act pursuant to which
the underlying lawsuit was brought. See id. Finally, the court noted that “[p]ractical
considerations support this construction. The progress of administrative proceedings
is largely within the control of the Government. A limitations period that began to run
only after the government concluded its administrative proceedings would thus amount
in practice to little or none.” Id. at 482-83.
The First Circuit takes the opposite position. See United States v. Meyers, 808
F.2d 912 (1st Cir. 1987). In Meyers, another proceeding under the Export
Administration Act, the First Circuit rejected Core’s reasoning (“the core of Core,” id.
at 913). Instead, the court held that where the Act which authorizes the assessment of
a penalty provides for an administrative procedure for assessing that penalty, the statute
of limitations at § 2462 does not begin to run until “the penalty has first been assessed
administratively.” Id. at 914. The Meyers court noted the “obvious proposition that
a claim for ‘enforcement’ of an administrative penalty cannot possibly ‘accrue’ until
there is a penalty to be enforced.” Id. Because the court found the language of the
relevant statutes to be unambiguous, it rejected any resort to statutory construction to
aid in interpretation. Id. at 915. Further, the court noted that rather than preventing
government abuses, the Fifth Circuit’s interpretation could encourage violator abuses
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of the administrative system. If the government has only five years from the date of the
violation to assess a penalty and begin collection proceedings, the violator would have
great incentive to delay the process as much as possible, hoping that the government’s
clock would run out before the enforcement proceeding began. See id. at 919. The
court additionally noted that,
[o]utside of the Fifth Circuit, no court has ever held that, in a case where
an antecedent administrative judgment is a statutory prerequisite to the
maintenance of a civil enforcement action, the limitations period on a
recovery suit runs from the date of the underlying violation as opposed to
the date on which the penalty was administratively imposed.
Id. at 916.
The parties direct us to only one case that has examined the question of when a
claim accrues under § 1818. In that case, the court followed the First Circuit’s lead and
held that “[t]he government could not bring an action in this court to enforce the penalty
until the final decision was issued, . . . and the assessment was not further appealed.”
United States v. McIntyre, 779 F. Supp. 119, 122 (S.D. Iowa 1991).2
The issue has significant consequences. In this case, under the Fifth Circuit’s
2
One other court has considered this question, ironically, in reference to
Donohoo himself. During the course of the enforcement proceedings, Donohoo
filed for bankruptcy in Florida, pursuant to Chapter 13 of the Bankruptcy Code.
The government protested that the assessment of its fine against Donohoo raised
Donohoo’s debt beyond the cap for eligibility under Chapter 13. Donohoo
countered by alleging that the government could not collect the penalty, because of
the running of the statute of limitations period. The United States Bankruptcy Court
for the Middle District of Florida, following the First Circuit’s interpretation, held
that “the assessment did not become final until the Supreme Court denied the
Debtor’s petition for certiorari on October 6, 1997.” In Re Donohoo, 243 B.R. 139,
142 (Bankr. M.D. Fla. 1999).
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reasoning, the government would have had to commence its collection proceedings by
July, 1995; thus, it would now be time-barred from attempting to enforce the penalty
against Donohoo. Under the First Circuit’s reasoning, however, the action instituted
by the government in 1998 would be timely.
We find the First Circuit's reasoning to be more persuasive. We therefore hold
that where an Act which authorizes the assessment of a civil penalty also provides for
an administrative procedure for assessing that penalty, the statute of limitations period
set out in § 2462 will not begin to run until that administrative process has resulted in
a final determination.3
Our conviction that this is the correct rule is reinforced by our observation that
§ 1818(i) does not allow the government to begin a collection proceeding until the
defendant “fails to pay an assessment after any penalty imposed under this paragraph
has become final.” 12 U.S.C. § 1818(i)(2)(I)(i). In other words, the government is
precluded from bringing an enforcement action until the penalty has been finalized
through administrative proceedings. Under the Fifth Circuit's rule, the government
could find itself unable to collect on a penalty simply because those proceedings have
taken too long. A violator should not be able to escape paying a penalty by dragging
his feet through the administrative penalty- assessment process. Thus, we hold that the
government's enforcement action is timely.
Affirmed.
3
We need not decide whether an appeal of an administrative decision to the
federal courts would be considered part of the administrative penalty-assessment
process, for purposes of determining when the limitations period begins to run.
Both the date that the final administrative order was entered, and the date the
Supreme Court denied review are within five years of the date the government
initiated this suit.
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A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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