Banking Enforcement as a Public Right: Fifth Circuit Holds No Seventh Amendment Jury in § 1818 Proceedings and Ties Limitations Accrual to Agency Determination

Ortega v. Office of the Comptroller of the Currency, No. 23-60617 (5th Cir. Sept. 8, 2025)

Introduction

In Ortega v. Office of the Comptroller of the Currency, the Fifth Circuit denied a petition for review brought by two former senior executives of First National Bank of Edinburg, Texas. The Office of the Comptroller of the Currency (OCC) had imposed industry bars and civil penalties after finding that the executives orchestrated three sets of unsafe and unsound practices in the wake of the 2008 financial crisis: (1) a “Capital Raise Strategy” in which bank-funded loans were used to purchase holding company stock and then “downstreamed” back to the bank as purported capital; (2) an aggressive, highly concessional OREO (Other Real Estate Owned) disposition program; and (3) noncompliant nonaccrual loan accounting, including a switch to cash-basis treatment without required documentation.

On appeal, the petitioners raised six issues: (1) the Seventh Amendment right to a jury in administrative enforcement actions seeking civil penalties; (2) the validity of the presiding ALJ’s appointment post-Lucia; (3) the statute of limitations under 28 U.S.C. § 2462 for § 1818 actions; (4) several evidentiary and procedural rulings; (5) the sufficiency of the evidence to sustain industry prohibition orders; and (6) whether due process requires a clear-and-convincing standard for prohibition orders. The Fifth Circuit resolved each against the petitioners.

Most consequentially, the court held that federal banking enforcement actions under 12 U.S.C. § 1818 fall within the “public rights” doctrine and thus do not carry a Seventh Amendment jury trial right—even when civil penalties and industry bars are at stake. The court also clarified how the five-year statute of limitations in § 2462 accrues for § 1818 cases: accrual is tied to the agency’s determination of the “effect” element (e.g., that loss “will probably” occur or “has occurred”), rather than automatically at the earliest possible manifestation of effect. Together, these holdings refine the post-Jarkesy landscape for administrative enforcement.

Summary of the Opinion

• Seventh Amendment: The court held that OCC enforcement under § 1818 adjudicates public rights. Unlike SEC antifraud actions in Jarkesy—which track traditional common law fraud—banking enforcement is bound up with uniquely federal functions (currency, deposit insurance, national bank supervision) historically adjudicated by the political branches. No jury trial right attaches.
• Appointments Clause: The OCC reassigned the case after Lucia to an ALJ appointed by the Treasury Secretary. Because a department head made the appointment, the ALJ’s appointment was valid. Discovery complaints on this issue were meritless given the record.
• Statute of Limitations: Applying § 2462’s “first accrued” language and Corner Post’s accrual framework, the court rejected a free-floating “separate accrual” by effect type. Instead, accrual under § 1818(e) and (i) hinges on when the agency determines the requisite “effect” (e.g., likely or actual harm), not merely when harm could theoretically have first been shown. Gabelli’s skepticism of lenient accrual for agencies also counsels against strategic delay once the agency has determined probable harm.
• Trial/Evidentiary Rulings: Exclusion of broad Fannie Mae/Freddie Mac exhibits as repetitive/irrelevant, handling of offers of proof, and admission of certain deposition materials were within the OCC’s procedural discretion and supported by substantial evidence.
• Prohibition Orders: The Comptroller permissibly rejected the ALJ’s no-prohibition recommendation. Record evidence supported “heedless indifference”/recklessness—particularly the concealment of the Capital Raise Strategy from the OCC and misleading internal records—satisfying the culpability prong for prohibition.
• Evidentiary Standard: Preponderance of the evidence is the correct standard for civil administrative enforcement that may include permanent industry bars, consistent with Steadman and Herman & MacLean.

Analysis

Precedents Cited and Their Influence

The opinion situates its Seventh Amendment analysis within the Supreme Court’s contemporary articulation of the public-rights doctrine in SEC v. Jarkesy, 603 U.S. 109 (2024), and contrasting lines of cases. In Jarkesy, the Court concluded that SEC antifraud actions seeking civil penalties are essentially common-law fraud claims (a private right) that historically belonged in Article III courts with juries. The key pivot in Ortega is that § 1818 enforcement is unlike SEC antifraud: it regulates the safety-and-soundness of federally chartered banks—a statutory and institutional architecture created by Congress to serve public monetary and fiscal ends.

To demonstrate that banking enforcement has a “serious and unbroken historical pedigree” in the political branches (to use Justice Gorsuch’s phrase in Jarkesy), the court canvassed:

• Early Supreme Court cases portraying national banks as public instrumentalities for national purposes (Osborn v. Bank of the U.S., 22 U.S. 738 (1824); Tiffany v. National Bank of Mo., 85 U.S. 409 (1873); Davis v. Elmira Sav. Bank, 161 U.S. 275 (1896); Bushnell v. Leland, 164 U.S. 684 (1897); Easton v. Iowa, 188 U.S. 220 (1903)).
• The legislative lineage from the National Currency Act of 1863 and the National Bank Act of 1864, to the Federal Reserve Act, the creation of the FDIC (Glass-Steagall), and FIRREA (1989), showing Congress’s continuous assignment of national bank supervision and enforcement to the executive branch.
• Classic “public rights” categories such as revenue collection (Murray’s Lessee), immigration (Oceanic Steam Navigation), and other areas historically determined by the political branches. The court analogized banking enforcement to these sovereign prerogatives, not to private-law fraud.

The court acknowledged its prior decision in Akin v. OTS, 950 F.2d 1180 (5th Cir. 1992), which had suggested no jury right in OTS proceedings, but carefully declined to rest its holding on Akin, both because Akin involved equitable disgorgement and because Jarkesy requires a granular, historical analysis. The court also reconciled its fresh decision in AT&T, Inc. v. FCC (5th Cir. Aug. 22, 2025), where it rebuffed the FCC’s attempt to shoehorn carrier negligence into public rights. There, the Fifth Circuit warned against elevating the “importance of an industry” to a public right. In Ortega, by contrast, the court found national bank enforcement is not about general industry regulation but about a federal sovereign edifice—national currency, deposit insurance, and chartering authority—that Congress created and historically enforced through the executive.

In addressing limitations, the court engaged with the D.C. Circuit’s Proffitt v. FDIC, 200 F.3d 855 (D.C. Cir. 2000), which had treated § 1818(e)’s alternative “effect” prongs (loss “has occurred” vs. “will probably occur”) as generating “separate accrual.” While crediting Proffitt’s desire to give text effect, the Fifth Circuit was wary that “separate accrual” collides with § 2462’s “first accrued” directive and leaves defendants without a clear start date. The court harmonized the problem by focusing on § 1818(e)’s “whenever the agency determines” clause: accrual turns on when the agency determines the requisite effect—either probable or actual—not whenever the agency later chooses to proceed.

The Supreme Court’s Gabelli v. SEC, 568 U.S. 442 (2013), further informed the analysis: agencies with investigative powers do not get a discovery-rule grace period, and should not be permitted to easily defer the clock once they have determined probable harm.

Legal Reasoning and How the Court Reached Its Results

1) Seventh Amendment and the Public-Rights Doctrine

The Seventh Amendment inquiry has two steps: (a) is the action of a type that historically requires a jury (looking both to the cause of action and the remedy), and (b) if so, does the public-rights doctrine nonetheless permit assignment to an agency for adjudication? The court trained its analysis on step (b).

Key pillars of the court’s reasoning include:

• The national banking system is a federal creation. Congress built national banks, the associated currency and reserve system, and deposit insurance to accomplish public ends under Article I. Enforcement against national banks is part of that sovereign structure.
• Unlike the SEC’s antifraud authority after Dodd-Frank—which the Supreme Court emphasized had long been adjudicated in Article III courts—§ 1818 has never allowed agencies to choose between federal court and in-house adjudication for penalties. Congress from inception kept § 1818 enforcement in-house, subject to APA review.
• The claims here are not merely private disputes in a pre-existing marketplace. They are aimed at preserving bank safety-and-soundness, protecting the deposit insurance fund, and safeguarding currency stability—core public objectives historically allocated to non-Article III branches.
• The court distinguished its recent AT&T decision by focusing not on the “importance” of the bank industry, but on the uniquely federal genesis and function of national banks and their supervision.

Result: § 1818 enforcement fits within the narrow public-rights doctrine. No Seventh Amendment jury is required for OCC civil penalties or industry bars issued through administrative proceedings.

2) Appointments Clause Compliance Post-Lucia

After Lucia v. SEC, 585 U.S. 237 (2018), the OCC reassigned the case to an ALJ appointed by the Treasury Secretary. Because a department head appointed the ALJ, the appointment satisfied the Appointments Clause. Petitioners’ discovery complaints failed because the appointment documents were already part of the record.

3) Statute of Limitations: Accrual Tied to Agency Determination

Section 2462 imposes a five-year limit running from when a claim “first accrued.” Applying Corner Post, accrual occurs when all elements are present and can be pleaded. For § 1818(e) prohibition orders and § 1818(i) civil penalties, the OCC must establish misconduct, the requisite “effect” (actual loss or probable loss/prejudice), and culpability.

Three clarifications emerge:

• The court rejected a blanket “separate accrual” rule for each alternative “effect” (e.g., probable vs. actual loss) because it undermines § 2462’s “first accrued” text and fair notice. Instead, the clock is pegged to the time when the agency determines the effect prong is satisfied under the theory it proceeds on.
• Gabelli cautions that agencies should not benefit from delayed accrual where they possess responsibility and tools to investigate. Thus, once the agency determines probable harm, it cannot wait for actual losses simply to extend the clock.
• In Ortega, the record did not show that the OCC had determined probable harm earlier; the petitioners’ concealment and misleading communications cut against an earlier accrual date. By contrast, for misreporting claims based on Call Reports, each inaccurate filing is a discrete violation with its own accrual date.

4) Trial and Evidentiary Rulings

The ALJ’s exclusion of voluminous Fannie Mae/Freddie Mac materials as repetitive and irrelevant was sustained under OCC procedural rules permitting efficient conduct of hearings. Any concern about the ALJ’s refusal to take offers of proof was mooted because the Comptroller himself reviewed petitioners’ proffers before issuing the final decision. Hearsay and deposition-use objections were found waived or unsupported and, in any event, administrative proceedings permit more flexible evidentiary practices than courts. Substantial evidence supported the agency’s rulings.

5) Prohibition Orders: Recklessness and “Continuing Disregard”

To impose industry bars under § 1818(e), the agency must prove culpability beyond mere negligence—often framed as recklessness or “continuing disregard” for bank safety. The ALJ believed petitioners acted in good faith under crisis conditions and recommended against prohibition. The Comptroller disagreed, emphasizing:

• Petitioners knowingly approved dozens of bank-funded loans for stock purchases, recorded internally as routine working capital loans, while contemporaneously representing to the OCC that capital raises were genuine and not bank-financed.
• Record evidence showed “demonstrably deceptive practices,” “habitual inattention,” and concealment in both external communications and internal bank records.

This satisfied recklessness/heedless indifference. The Fifth Circuit upheld the Comptroller’s decision, noting that when the Comptroller departs from the ALJ, he must give reasons—which he did—and that the record contained substantial evidence supporting prohibition.

6) Evidentiary Standard: Preponderance Applies

The court reaffirmed that the preponderance standard governs civil administrative enforcement—even where sanctions include permanent industry bars—citing Steadman v. SEC, 450 U.S. 91 (1981), and Herman & MacLean v. Huddleston, 459 U.S. 375 (1983). The petitioners’ due process argument for a clear-and-convincing standard was rejected.

Impact and Implications

A. Post-Jarkesy Map of Administrative Adjudication

• The decision draws a sharp, historically grounded line: administrative adjudication without a jury remains permissible when Congress has created a regulatory regime tightly bound to sovereign functions—here, national currency, deposit insurance, and federal bank chartering—and has historically vested enforcement in the executive, not Article III courts.
• It narrows how Jarkesy might be used against other agencies: regimes that govern private-party conduct in pre-existing markets (e.g., fraud) are unlikely to qualify as public rights, whereas regimes administering quintessentially federal constructs (e.g., safety-and-soundness of national banks) may.
• The decision complements, rather than conflicts with, the Fifth Circuit’s AT&T ruling limiting public-rights claims for the FCC: Ortega does not equate “important industry” with “public right”; it focuses on uniquely federal institutions historically enforced by the political branches.

B. Statute of Limitations Practice Under § 1818

• Agencies: Expect litigants to demand evidence of when the agency “determined” the effect element. Documenting the timing and basis of effect determinations will become critical to defend timeliness.
• Respondents: A viable timeliness defense will turn on demonstrating that the agency determined probable harm outside the five-year window. Discovery aimed at internal agency determinations and contemporaneous communications may be pivotal.
• Repeated Filings: For reporting violations (e.g., Call Reports), each inaccurate filing is a discrete act with its own accrual date; “continuing violation” arguments are weak.

C. Substantive Banking Compliance Takeaways

• Capital Raise Loans: Bank-financed purchases of holding company equity that are “downstreamed” as capital will not count as Tier 1 capital and can be deemed unsafe and unsound. Concealment or mischaracterization of such loans materially increases enforcement risk and personal liability.
• OREO Dispositions: Aggressive, below-market OREO financing without demonstrated repayment capacity is a red flag. GAAP-compliant present-value loss recognition is essential; failing to apply required cash-flow discounting will overstate assets and can ground reporting violations.
• Nonaccrual Accounting: Switching from cost-recovery to cash-basis on nonaccrual loans without the required support (documentation and ability-to-repay analysis) can produce material misstatements in Call Reports and trigger penalties.
• Board and L&D Committee Oversight: Minutes and loan presentations must accurately disclose loan purposes. Misleading internal records will be treated as evidence of recklessness and “continuing disregard.”

D. Sanctions and Evidentiary Standards

• The preponderance standard remains the rule for § 1818 prohibition orders and penalties. Mitigation arguments should be substantiated by contemporaneous transparency with regulators and robust internal controls, not merely ex post assertions of “good faith under crisis.”
• Where the Comptroller departs from an ALJ’s recommendation, a reasoned explanation that is supported by substantial evidence will be upheld.

Complex Concepts Simplified

• Public Rights vs. Private Rights: Public-rights claims are those historically entrusted to the political branches (executive/legislative), often involving sovereign functions (taxes, immigration, currency). Private-rights claims resemble common-law actions (e.g., fraud, breach of contract) between private parties. The former can be assigned to agency adjudication without a jury; the latter generally cannot.
• § 1818 Enforcement (Banking Agencies): Authorizes agencies like the OCC, FDIC, and Federal Reserve to bring administrative actions seeking cease-and-desist orders, civil penalties, and industry bars against “institution-affiliated parties” for unsafe or unsound practices, breaches of fiduciary duty, and reporting violations.
• OREO: Real estate owned by a bank after foreclosure or in lieu of foreclosure. OREO typically imposes carrying costs and is not income-producing. Dispositions on concessional terms can be risky and require rigorous valuation and loss recognition.
• Tier 1 Capital: Core capital (e.g., common equity, disclosed reserves) used to absorb losses. Capital cannot be “manufactured” by bank loans to purchase holding company stock and then injected back; such circularity fails regulatory capital rules.
• Nonaccrual Loan Accounting: When collection is doubtful, a loan is placed on nonaccrual. Under cost-recovery, payments reduce principal; no interest income is recognized. Under cash-basis, interest may be recognized—but only with robust evidence of ability to repay and regulatory compliance.
• Call Reports: Quarterly regulatory filings (Reports of Condition and Income). Material misstatements can ground enforcement actions and penalties; each filing is a discrete act.
• “Continuing Disregard”: A culpability standard for prohibition orders—conduct voluntarily engaged in over time with heedless indifference to its consequences for bank safety and soundness, akin to recklessness.

Conclusion

Ortega v. OCC is a significant post-Jarkesy refinement of the boundary between private and public rights in administrative enforcement. The Fifth Circuit holds that national bank safety-and-soundness enforcement under § 1818 is a public right rooted in centuries of federal lawmaking and executive branch practice. Consequently, no Seventh Amendment jury right attaches to OCC administrative proceedings seeking penalties and industry bars.

Equally important, the court clarifies limitations accrual for § 1818: the five-year clock in § 2462 turns on when the agency determines the requisite “effect” (probable or actual harm), not on the earliest possible theoretical effect and not on a malleable “separate accrual” theory that would unsettle the “first accrued” rule. Agencies must mind Gabelli’s admonition against open-ended delays once they have determined probable harm.

On the merits, Ortega confirms that circular, bank-financed “capital raises,” aggressive OREO financing without repayment capacity, and noncompliant nonaccrual accounting are paradigmatic unsafe and unsound practices—especially when obscured from regulators. The court affirms the Comptroller’s authority to impose industry bars on a preponderance standard where the record shows recklessness and concealment, and it defers to reasonable evidentiary management in administrative proceedings.

In the broader legal context, Ortega strengthens the doctrinal footing for banking agencies to adjudicate safety-and-soundness violations in-house, while providing a more precise accrual rule for limitations. It will shape both enforcement strategy and defense posture across the OCC, FDIC, Federal Reserve, and NCUA, and it offers a carefully reasoned template for distinguishing genuinely “public” regulatory claims from those that must be tried to a jury in Article III courts.