Paul D. Jonson v. Federal Deposit Insurance Corporation

UNITED STATES OF AMERICA
MERIT SYSTEMS PROTECTION BOARD
2015 MSPB 36
Docket No. PH-0752-13-0236-I-1
Paul D. Jonson,
Appellant,
v.
Federal Deposit Insurance Corporation,
Agency.
May 4, 2015
Paul J. Adams, Esquire, Brockton, Massachusetts, for the appellant.
Eric S. Gold, Arlington, Virginia, for the agency.
BEFORE
Susan Tsui Grundmann, Chairman
Mark A. Robbins, Member
OPINION AND ORDER
¶1 The Federal Deposit Insurance Corporation (FDIC) has filed a petition for
review of the initial decision, which reversed the appellant’s removal. For the
reasons discussed below, we GRANT the petition for review, VACATE the initial
decision, and REMAND the appeal to the regional office for further adjudication
in accordance with this Opinion and Order.
BACKGROUND
¶2 FDIC removed the appellant from his position as Case Manager for conduct
prohibited by its regulations at 12 C.F.R. Part 336, Subpart B, concerning
minimum standards of fitness for employment (the minimum fitness regulations).
2
Jonson v. Federal Deposit Insurance Corporation, 121 M.S.P.R. 56, ¶ 2 (2014)
(Jonson I). The basis of the removal was the appellant’s alleged failure to satisfy
eight separate debts to FDIC-insured institutions. Id., ¶ 2; Initial Appeal File
(IAF), Tab 4 at 125-26 of 129. The agency found that this conduct violated the
prohibition in the minimum fitness regulations against “a pattern or practice of
defalcation.” Jonson I, 121 M.S.P.R. 56, ¶ 2; 12 C.F.R. § 336.5(a)(3). A pattern
or practice of defalcation is defined in the regulations, in pertinent part, as “[a]
history of financial irresponsibility with regard to debts owed to insured
depository institutions which are in default in excess of $50,000 in the
aggregate.” 12 C.F.R. § 336.3(i)(1). The regulations provide that employees who
are not in compliance “shall be terminated.” 12 C.F.R. § 336.8(a).
¶3 This is the second time we have considered the appellant’s removal. The
administrative judge previously certified the following rulings for interlocutory
review:
1. Pursuant to the Resolution Trust Corporation Completion Act
(RTCCA), 1 FDIC was authorized by Congress to promulgate
minimum standards for employment, which are set forth in 12 C.F.R.
§ 336.5;
2. FDIC was required to obtain concurrence from the Office of
Government Ethics (OGE) before enacting 12 C.F.R. Part 336;
3. FDIC defined the word “defalcation” in 12 C.F.R. Part 336 more
broadly than is utilized in the Bankruptcy Code;
4. FDIC was permitted to utilize a more expansive definition of the
word “defalcation”;
5. If FDIC establishes by preponderant evidence that the appellant
violated 12 C.F.R. Part 336, such a violation would not necessarily
subject him to mandatory removal as prescribed in 12 C.F.R.
§ 336.8; and
1
At issue is section 19 of the RTCCA, Pub. L. No. 103-204, § 19, 107 Stat. 2369,
2402-04 (1993) (codified as amended at 12 U.S.C. § 1822(f)).
3
6. The Board has jurisdiction over the appeal of the adverse
employment action suffered by the appellant, including a
determination regarding the reasonableness of the penalty in light of
the criteria and exceptions set forth in 12 C.F.R. Part 336.
Jonson I, 121 M.S.P.R. 56, ¶¶ 1, 3.
¶4 Previously, on interlocutory review, we affirmed the administrative judge’s
rulings regarding issues 1, 2, and 6, reversed the appellant’s removal, and
returned the appeal to the regional office for further adjudication of his prohibited
personnel practices claims. 2 Id., ¶¶ 1, 5, 18-20. The reversal was based on the
determination that the removal was “not in accordance with law” because the
minimum fitness regulations on which it was based were promulgated without
the approval of OGE, as required by section 1822(f)(2) of the RTCCA. Jonson
I, 121 M.S.P.R. 56, ¶¶ 16-17.
¶5 After the appeal was returned to the administrative judge, the appellant
withdrew his prohibited personnel practices claims with prejudice. IAF, Tab 32
at 4. Therefore, the administrative judge issued an initial decision finding these
claims moot and adopting the Board’s reversal of the appellant’s removal. IAF,
Tab 34, Initial Decision (ID) at 4-5.
¶6 FDIC has filed a petition for review, arguing that we exceeded the scope of
our authority by invalidating the minimum fitness regulations and that our finding
that OGE approval was required for the regulations was incorrect. Petition for
Review (PFR) File, Tab 1 at 4-5. 3 The appellant has not responded to the petition
2
Member Robbins dissenting.
3
FDIC has provided a certification of compliance with the interim relief order in the
in itial decision. PFR File, Tab 1 at 7, 29; see ID at 6-7 (ordering interim relief); see
also 5 C.F.R. § 1201.116(a) (an agency’s petition for review filed in a case where the
appellant was the prevailing party and was granted interim relief must be accompanied
by a certification of compliance with the interim relief order). The appellant has not
challenged the certification, and therefore we decline to review it further here. Cf.
Guillebeau v. Department of the Navy, 362 F.3d 1329, 1332-34 (Fed. Cir. 2004)
(interpretin g 5 C.F.R. § 1201.116(e), identified by its previous location at
4
for review. We disagree with FDIC regarding the first issue. However, in light
of an OGE declaration provided by FDIC after we issued Jonson I, we now find
that OGE concurrence was not required prior to the promulgation of the minimum
fitness regulations. See id. at 28 (containing the OGE declaration); IAF, Tab 23
at 30 (same). Therefore, we REVERSE our prior ruling regarding issue 2, above.
In light of this finding, we now address certified issues 3, 4, and 5, which we
previously did not reach. Jonson I, 121 M.S.P.R. 56, ¶¶ 1, 5.
ANALYSIS
The Board acted within its authority in declining to follow the minimum fitness
regulations.
¶7 FDIC argues that we exceeded the scope of our authority when we
invalidated its minimum fitness regulations. PFR File, Tab 1 at 8-11. According
to FDIC, the Board’s authority is limited to review of Office of Personnel
Management (OPM) regulations, as provided in 5 U.S.C. § 1204(f). PFR File,
Tab 1 at 8-9; see IAF, Tab 13 at 7 (making this argument below). 4 We disagree
with FDIC that we invalidated its minimum fitness regulations. We also find
unpersuasive FDIC’s reliance on decisions that address the scope of the Board’s
original jurisdiction under section 1204(f), because this appeal arises under the
Board’s appellate jurisdiction.
¶8 In Jonson I, we found that the adverse action was taken pursuant to
regulations that FDIC promulgated without concurrence from OGE. Jonson
I, 121 M.S.P.R. 56, ¶¶ 10, 16. Therefore, we found the regulations to be “not in
accordance with law.” Id., ¶ 17 (citing 5 U.S.C. § 7701(c)(2)(C) (providing that
section 1201.115(b)(4), as providing that dismissal for failure to comply with interim
relief is d iscretionary).
4
Because we did not previously address this argument in Jonson I , we do so now.
5
an adverse action may not be sustained if it is “not in accordance with law”)).
We did not make a finding that the regulations were invalid. 5
¶9 FDIC argues that our “authority to review regulations is limited to that
which is provided by 5 U.S.C. § 1204(f).” PFR File, Tab 1 at 8-11 (citing Latham
v. U.S. Postal Service, 117 M.S.P.R. 400 (2012); Thompson v. Office of Personnel
Management, 87 M.S.P.R. 184 (2000); Ramsey v. Office of Personnel
Management, 87 M.S.P.R. 98 (2000)). The Board has two types of jurisdiction,
original and appellate. 5 C.F.R. § 1201.1. The Board’s original jurisdiction
includes, in pertinent part, review of rules and regulations issued by OPM to
declare such provisions invalid on their face or invalidly implemented by any
agency. 5 U.S.C. § 1204(a)(4), (f)(2); Thompson, 87 M.S.P.R. 184, ¶ 7; 5 C.F.R.
§ 1203.1. In Thompson, the Board found that its original jurisdiction does not
include the authority to determine whether OPM followed the proper procedures
in issuing its regulations. 87 M.S.P.R. 184, ¶ 8 (citing 5 U.S.C. § 1204). In
contrast, in the instant appeal, our authority arises from our appellate jurisdiction
under chapter 75 of Title 5. 5 U.S.C. § 7512(1) (including removals among
adverse actions appealable to the Board); Samble v. Department of
Defense, 98 M.S.P.R. 502, ¶ 11 (2005) (finding that the involuntary separation of
an appellant who met the statutory definition of employee with adverse action
appeal rights fell within the Board’s appellate jurisdiction); 5 C.F.R.
§ 1201.3(a)(1) (listing adverse actions as falling within the Board’s appellate
jurisdiction). We find unpersuasive FDIC’s citation to Thompson to suggest that
5
Although we stated in Jonson I that the minimum fitness regu lations were “invalid ly
promulgated,” we did not intend to infer by that statement that we were invalidating the
regu lations. Jonson I , 121 M.S.P.R. 56, ¶ 17.
6
we cannot review whether an agency other than OPM properly promulgated
regulations in determining whether to sustain an adverse action. 6
¶10 We also are not persuaded by FDIC’s arguments that the Board lacks
authority to invalidate regulations under the Administrative Procedures Act
(APA). PFR File, Tab 1 at 9-11 & n.3 (citing Latham, 117 M.S.P.R. 400,
¶¶ 18-19 (holding that the Board does not have jurisdiction under the APA to
review OPM regulations to determine whether they exceed the statutory grant of
authority, but going on to discuss the Board’s authority to address whether a
regulation improperly expands Board jurisdiction because the Board’s jurisdiction
is always before it)); see 5 U.S.C. § 706(2)(C) (granting reviewing courts the
authority under the APA to “hold unlawful and set aside agency action . . . in
excess of statutory . . . authority”). We did not review the minimum fitness
regulations under the APA and did not invalidate them in any event. Rather, we
declined to follow them as they concerned this adverse action appeal. Jonson
I, 121 M.S.P.R. 56, ¶¶ 9, 17.
FDIC was not required to obtain concurrence from OGE for its minimum fitness
regulations.
¶11 After we issued Jonson I, FDIC submitted a declaration from OGE stating
that FDIC was not required to obtain concurrence from OGE prior to
promulgating the minimum fitness regulations. 7 PFR File, Tab 1 at 7, 28. As a
6
We are likewise unpersuaded by the agency’s citation to Ramsey. PFR File, Tab 1 at 9
(citin g Ramsey, 87 M.S.P.R. 98, ¶ 10 (finding that a challenge to an OPM regulation
that merely repeated statutory language failed because the Board does not have
authority under section 1204(f) to review a statutory provision)).
7
The agency submitted this declaration for the first time below as part of a motion for
reconsideration, which it titled a request to reopen. IAF, Tab 23 at 6, 30. The Clerk of
the Board denied the motion because reconsideration of interlocutory decisions is not
contemplated by the Board’s regulations. See 5 C.F.R. §§ 1201.91-.93 (containing the
Board’s regulations on interlocutory appeals).
7
matter of comity to OGE, we now find that its concurrence was not required for
the minimum fitness regulations and overrule our contrary holding in Jonson I. 8
¶12 OGE “provide[s], in consultation with [OPM], overall direction” on the
prevention of conflicts of interest by executive agency employees. 5 U.S.C. app.
§ 402(a); 5 C.F.R. § 2600.101(a). Executive agencies in this context include
FDIC. See 5 U.S.C. § 105 (defining executive agency to include government
corporations); 5 U.S.C. app. § 402(a) (incorporating the definition of executive
agency from 5 U.S.C. § 105); 12 U.S.C. §§ 1811-12 (establishing FDIC and its
general structure as a government corporation), 1822(f)(1)(A) (stating that FDIC
is an agency for purposes of Title 18); 31 U.S.C. § 9101(2)(B) (reflecting that
FDIC is a “mixed-ownership Government corporation”); Supplemental Standards
of Ethical Conduct for FDIC Employees, 72 Fed. Reg. 19,375, 19,376 (Apr. 18,
2007) (reflecting that FDIC obtained OGE concurrence for changes to its ethics
regulations codified at 5 C.F.R. Part 3201). OGE has broad oversight of
executive branch ethics, including developing rules and regulations on conflicts
8
Under the law of the case doctrine, a tribunal generally will not reconsider issues that
already have been decided in an appeal, unless there is new and material evidence
adduced at a subsequent trial, controlling authority has made a contrary decision of law,
or the prior decision was clearly erroneous and would work a manifest injustice.
O’Connell v. Department of Navy, 73 M.S.P.R. 235, 240 (1997). The doctrine “merely
expresses the practice of courts generally to refuse to reopen what has been decided,
[and is] not a limit to their power.” Messinger v. Anderson, 225 U.S. 436, 444 (1912);
see Mendenhall v. Barber-Greene Co., 26 F.3d 1573, 1582-83 (Fed. Cir. 1994)
(observing that a court’s decision to apply the law of the case doctrine is with in its
discretion). Although FDIC had previously provided a letter from OGE that opined that
“FDIC complied with the requirements of OGE’s regu latory process leading up to its
publication” of the minimum fitness regulations, the letter provided no insight into what
compliance was required or how FDIC complied. IAF, Tab 10 at 18; see Jonson I,
121 M.S.P.R. 56, ¶ 10 (referring to this evidence). In contrast, the new OGE
declaration states that concurrence was not required and provides an explanation for
this conclusion. PFR File, Tab 1 at 28. In light of this declaration, we find our prior
decision in Jonson I was clearly erroneous, and therefore we do not apply the law of the
case doctrine to our finding that prior OGE concurrence was required for the minimum
fitness regulations.
8
of interest; evaluating the need for changes in agency ethics and conflict of
interest rules and regulations to make them consistent with conflict of interest
laws; and providing information on, and promoting the understanding of, ethical
standards in executive agencies. 9 5 U.S.C. app. § 402(b)(1), (12), (14); 5 C.F.R.
§ 2635.105 (discussing the requirement that agencies obtain concurrence from
OGE for regulations supplementing OGE’s standards of ethical conduct for
employees of the executive branch).
¶13 The new OGE declaration responds to our Jonson I decision. PFR File,
Tab 1 at 28. The declaration states that “OGE concurrence was not required
under 12 U.S.C. § 1822(f)(2)” for the minimum fitness regulations. PFR File,
Tab 1 at 28. As a matter of comity and cooperation, we defer to OGE’s
determination that FDIC was not required to obtain its approval before
promulgating the minimum fitness regulations. Comity is the discretionary
practice of forums to recognize each other’s acts. B LAC K’ S LAW D ICT IONARY
303 (9th ed. 2009); see Montana-Dakota Utilities Co. v. Northwestern Public
Service Co., 341 U.S. 246, 254 (1951) (observing that it is proper for the court to
refer to an administrative forum a matter that falls within its authority both as a
matter of comity and to avoid conflict). Based on policy considerations of comity
and cooperation with the Equal Employment Opportunity Commission (EEOC) as
a coequal tribunal, the Board has previously exercised its discretion to defer to
EEOC’s procedural determinations regarding whether an appellant made a valid
election between the Board and equal employment opportunity processes.
Gomez-Burgos v. Department of Defense, 79 M.S.P.R. 245, ¶ 10 (1998)
(observing that the Board and EEOC are coequal in the mixed-case process); cf.
Cloutier v. U.S. Postal Service, 89 M.S.P.R. 411, ¶ 6 (2001) (deferring to the
9
In connection with these first two functions, OGE consults with, or seeks the
assistance of, the Attorney General and OPM. 5 U.S.C. app. § 402(b)(1), (12).
9
employing agency’s determination that a discrimination complaint was untimely).
This deference is based on the recognition of EEOC’s major responsibility for the
equal employment opportunity process and a desire not to frustrate EEOC’s goals.
Dawson v. U.S. Postal Service, 45 M.S.P.R. 194, 197 (1990). Similarly, we find
here that OGE is primarily responsible for oversight of the ethical standards of
federal employees. See Special Counsel v. Nichols, 36 M.S.P.R. 445, 455 (1988)
(recognizing that OGE is the agency primarily responsible for developing rules
and regulations pertaining to conflicts of interest and standards of conduct). Our
prior finding in Jonson I is contrary to OGE’s determination that its concurrence
in the minimum fitness regulations was not required and could create confusion.
Therefore, we find this situation one in which it is appropriate to defer.
¶14 In light of our ruling here, we reverse our prior finding in Jonson I that
section 1822(f)(2), and not section 1822(f)(4), of the RTCCA empowers FDIC to
prescribe the conduct for which it removed the appellant. Jonson I, 121 M.S.P.R.
56, ¶ 12. Section 1822(f)(2) requires FDIC to obtain OGE concurrence before
prescribing regulations that supplement the ethics and conflict of interest rules
and regulations issued by OGE. The declaration from OGE compared the
minimum fitness regulations to OGE’s own regulatory authority and concluded
that the minimum fitness regulations did not require OGE’s approval because they
did not “modify or expand the government-wide Standards of Ethical Conduct for
Executive Branch Employees, nor do they regulate an area reserved for
supplemental agency regulations (such as: outside activity limitations, prior
approval requirements and prohibited holding restrictions).” PFR File, Tab 1 at
28. Therefore, we conclude that FDIC was not required to promulgate the
minimum fitness regulations under section 1822(f)(2).
¶15 We also agree with FDIC that our prior ruling incorrectly found that it
lacks authority under section 1822(f)(4) to regulate employee conduct. Id. at
12-17; see Jonson I, 121 M.S.P.R. 56, ¶ 12. In evaluating an agency’s
construction of a statute, we look first to congressional intent. Chevron, U.S.A.,
10
Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 841-42 (1984).
Absent clear congressional intent, as here, we next examine whether the agency
was explicitly charged with filling in a gap left in the legislation. 10 Id. at 843-44.
Where, as here, we find that it was, the agency’s regulations “are given
controlling weight unless they are arbitrary, capricious, or manifestly contrary to
the statute.” Id. at 844. Express congressional authorization to an agency to
engage in rulemaking, and the use of the notice and comment procedures in
promulgating such rules, are significant indicators that Chevron deference is
appropriate. Mayo Foundation for Medical Education & Research v. United
States, 562 U.S. 44, 57-58 (2011).
¶16 The text of section 1822(f)(4) provides that FDIC may “prescribe
regulations . . . for ensuring that any individual who is performing, directly or
indirectly, any function on behalf of the Corporation meets the minimum
standards of competence, experience, integrity and fitness.” 12 U.S.C.
§ 1822(f)(4)(A). No OGE approval is required for the subject regulations.
Therefore, FDIC was charged with filling any gaps left in the statute with the
minimum fitness regulations. In promulgating the minimum fitness regulations,
FDIC relied on section 1822(f)(4)(E), which requires that the minimum fitness
regulations prohibit certain behaviors, including “a pattern or practice of
defalcation regarding obligations to insured depository institutions.” Minimum
10
FDIC argues that it has authority to promulgate the minimum fitness regulations
under section 1822(f)(4) of the RTCCA because: (1) the language of that section,
supported by the legislative history, unambiguously permits it to promulgate the
regu lations; (2) the subheadings contained in the RTCCA were borrowed from its
predecessor statute, and therefore we erred in rely ing on them to interpret section
1822(f) in our decision in Jonson I; and (3) the plain text of 12 U.S.C. § 1822(f)(4)(E)
may serve as the basis for its removal of the appellant. PFR File, Tab 1 at 11-22, 24.
In light of OGE’s declaration, we believe it is now clear that FDIC has authority to
promulgate the minimum fitness regulations under section 1822(f)(4). We find it
unnecessary, therefore, to reach FDIC’s remaining arguments.
11
Standards of Fitness for Employment with the Federal Deposit Insurance
Corporation, 61 Fed. Reg. 28,725, 28,726 (June 6, 1996). Further, before
finalizing its regulations, FDIC sought notice and comment. Minimum Standards
of Fitness for Employees with the Federal Deposit Insurance Corporation, 61 Fed.
Reg. 5956 (Feb. 15, 1996). We find the agency’s reliance on section 1822(f)(4)
to be appropriate, and we give its regulations controlling weight.
FDIC is not constrained by the definition of defalcation in the bankruptcy code.
¶17 In her certified rulings on issues 3 and 4, the administrative judge found
that FDIC’s definition of defalcation in the minimum fitness regulations was
broader than the definition in the bankruptcy code, but that FDIC was permitted
to use this broader definition. IAF, Tab 12 at 6-7, Tab 16 at 1. Both the
proposed removal and removal decision relied on the minimum fitness
regulations’ definition of a pattern or practice of defalcation to include “[a]
history of financial irresponsibility with regard to debts owed to insured
depository institutions which are in default in excess of $50,000 in the
aggregate.” IAF, Tab 4 at 82, 124 of 129 (quoting 12 C.F.R. § 336.3(i)(1)).
Relying on the bankruptcy code, the appellant argued that this definition is too
broad because it does not require a fiduciary relationship. IAF, Tab 11 at 8-9.
The agency argued that the definition of defalcation from the bankruptcy code is
irrelevant and that its own definition in the minimum fitness regulations is
entitled to deference. IAF, Tab 10 at 10-12, Tab 13 at 10. We agree. Therefore,
we find it unnecessary to address the administrative judge’s ruling regarding
certified issue 3, and we agree with her ruling regarding certified issue 4.
¶18 An agency has the right “to establish and enforce reasonable rules
governing the workplace.” Carosella v. U.S. Postal Service, 816 F.2d 638, 642
(Fed. Cir. 1987); Miller v. U.S. Postal Service, 7 M.S.P.R. 572, 577-78 (1981),
aff’d, 712 F.2d 1006 (6th Cir. 1983). Thus, the Board has held that, when an
agency charges an employee with violating its own policy or rule on sexual
harassment, it is not required to prove Title VII’s sexual harassment standards.
12
Hillen v. Department of the Army, 35 M.S.P.R. 453, 462 (1987). We also have
recognized that an agency has a right to promulgate and enforce reasonable
regulations governing its employees’ ethical conduct. Miller, 7 M.S.P.R. at
577-78.
¶19 The minimum fitness regulations are intended to “state the minimum
standards of fitness and integrity required” of those providing services on FDIC’s
behalf. 12 C.F.R. § 336.2(b). The prohibition on defalcation in the regulations is
limited to “obligations to insured depository institutions,” in other words, those
banking institutions and savings associations that FDIC insures. 12 U.S.C.
§ 1813(c)(2) (defining insured depository institutions); 12 C.F.R. §§ 336.3(h)
(same), 336.5(a)(3) (limiting the prohibition on defalcation to insured depository
institutions). According to the agency, the purpose of the prohibition on a history
of financial irresponsibility is to preserve its integrity and credibility. PFR File,
Tab 1 at 25-26; see 61 Fed. Reg. at 28,727 (explaining the purposes of the
prohibition on a pattern or practice of defalcation). Both the proposed removal
and removal decision relied on the minimum fitness regulation’s definition of a
pattern or practice of defalcation as “[a] history of financial irresponsibility with
regard to debts owed to insured depository institutions which are in default in
excess of $50,000 in the aggregate.” IAF, Tab 4 at 82, 124 of 129
(citing 12 C.F.R. § 336.3(i)(1)). Given FDIC’s relationship with the institutions
that it insures, we find that the agency’s definition of a pattern or practice of
defalcation is a reasonable exercise of its right to establish workplace rules.
¶20 In addition, we find that the agency’s prohibition on a pattern or practice of
defalcation is a valid exercise of its regulatory authority under the RTCCA. See
Chevron, 467 U.S. at 841-44. Congress specifically contemplated that the
minimum fitness regulations would prohibit individuals who “demonstrated a
pattern or practice of defalcation regarding obligations to insured depository
institutions . . . from performing any service on behalf of [FDIC].” 12 U.S.C.
§ 1822(f)(4)(E)(iii). As discussed above, FDIC provided public notice of, and
13
comment on, what are now codified as the minimum fitness regulations. 61 Fed.
Reg. at 5956. Included in the proposed regulations was the current definition of a
pattern or practice of defalcation. Compare id. at 5959 (containing the definition
in the final rule), with 12 C.F.R. § 336.3(i) (containing the identical definition in
the minimum fitness regulations). The definition has been in place since 1996.
See 61 Fed. Reg. at 28,729 (final rule); see also Barnhart v. Walton, 535 U.S.
212, 221-22 (2002) (indicating that the fact that an agency interpretation has been
longstanding weighs in favor of applying Chevron deference despite a lack of
“‘notice and comment’ rulemaking”). We find that FDIC’s definition of
defalcation is not arbitrary or capricious, and is consistent with the RTCCA. 11
Removal is the mandatory penalty for a pattern or practice of defalcation.
¶21 We did not reach the certified ruling in Jonson I on issue 5 that, if FDIC
established by preponderant evidence that the appellant violated the minimum
fitness regulations, he would not necessarily be subject to mandatory removal.
Jonson I, 121 M.S.P.R. 56, ¶ 9 n.2. We do so now, finding that, under the
RTCCA, the only penalty available for a pattern or practice of defalcation is
removal.
¶22 The RTCCA states that the minimum fitness regulations “shall prohibit any
person who does not meet [them] from . . . becoming employed by [FDIC] or
otherwise performing any service for or on behalf of [FDIC].” 12 U.S.C.
§ 1822(f)(4)(B)(ii). It also specifies that FDIC’s minimum fitness regulations
11
The agency’s definition of a pattern or practice of defalcation contains an exception
for defaults “caused by catastrophic events beyond the control of the employee such as
death, disability, illness or loss of financial support.” 12 C.F.R. § 336.3(i)(3). The
appellant claimed that the illnesses of his wife and children and the 2008 collapse of the
housing market precipitated his indebtedness. IAF, Tab 4 at 89-90 of 129. In light of
this regulatory exception for catastrophic events, the administrative judge should
determine on remand whether the agency proved the charge of defalcation, including
whether it properly found that the appellant did not fall with in this exception.
14
“shall . . . prohibit any person who has . . . demonstrated a pattern or practice of
defalcation regarding obligations to insured depository institutions . . . from
performing any service on behalf of [FDIC].” 12 U.S.C. § 1822(f)(4)(E)(iii).
The U.S. Court of Appeals for the Federal Circuit interpreted similar statutory
language in Delong v. Department of Health & Human Services, 264 F.3d 1334
(Fed. Cir. 2001), to find that it required removal. At issue in Delong was
language from 25 U.S.C. § 3207. 264 F.3d at 1340-41. In pertinent part, the
statute required the Secretary of Health and Human Services to prescribe
“minimum standards of character” regulations that would ensure that employees
in regular contact with Indian children had not been found guilty of certain
enumerated crimes. Id. (citing 25 U.S.C. § 3207(a)(3), (b)). In rejecting the
employee’s argument that the agency was required to consider mitigating factors
prior to removing her, the court observed that “the only way [the Department of
Health and Human Services] can ‘ensure’ that current employees meet the
minimum standards of character is to remove employees who fail to meet the
standards.” 12 Delong, 264 F.3d at 1341; cf. James v. Tablerion, 363 F.3d 1352,
1355, 1358-59 (Fed. Cir. 2004) (holding that the election of the penalty of
removal was not reviewable where the subject statute mandated removal for the
charged conduct and gave exclusive discretion to a specific individual within the
agency to decide whether to mitigate, and the designated official had made a
determination not to do so (relying on 26 U.S.C. § 7804 note)).
¶23 Similarly, the statute at issue here contemplates that individuals who
engage in a pattern or practice of defalcation will not perform service on behalf of
FDIC. The only way to avoid such service is if employees who violate the
regulations are removed. FDIC has given effect to the statute by stating in the
12
The appellant argued, below, that such a mandatory penalty is not appropriate for a
charge that is not based on misconduct. IAF, Tab 11 at 10. We do not find meaningful
this characterization of the charged behavior.
15
minimum fitness regulations that employees not in compliance with the
regulations “shall be terminated.” 12 C.F.R. § 336.8(a). Assuming that the
agency proves both the charge and that the appellant’s removal is for such cause
as to promote the efficiency of the service by preponderant evidence, the
administrative judge should not mitigate the penalty of removal. 13
ORDER
¶24 For the reasons discussed above finding that the Board’s prior reversal of
the appellant’s removal was in error, we CANCEL the order of interim relief and
REMAND this case to the regional office for further adjudication. 14
FOR THE BOARD:
______________________________
William D. Spencer
Clerk of the Board
Washington, D.C.
13
We therefore modify our finding in Jonson I regarding issue 6 to find that the
mandatory penalty for a pattern or practice of defalcation is termination. See Jonson I ,
121 M.S.P.R. 56, ¶¶ 6, 9.
14
On remand, the appellant should be provided with an opportunity to reinstate his
affirmative defenses because they appear to have been withdrawn in reliance on the
Board’s decision in Jonson I . IAF, Tab 32 at 4; see Jonson I , 121 M.S.P.R. 56,
¶¶ 18-19.