WASHINGTON -- The federal banking agencies may have to dismiss dozens -- or even hundreds -- of pending enforcement actions following the government's decision not to appeal a court ruling that sets a uniform statute of limitations on such cases.
The U.S. Solicitor General's decision not to seek review by the Supreme Court means the case, 3M Co. v. Browner, is now "the law of the land," said David W. Roderer, a partner at Winston & Strawn.
A federal appeals court held that a five-year statute of limitations governs all federal agency proceedings where civil money penalties or other punitive sanctions are at issue. The statute begins running at the time of the violation.
As such, the agencies must dismiss all complaints alleging infractions that occurred more than five years before the government brought charges, he said.
Mr. Roderer said the decision means that the agencies cannot pursue any violation, no matter how egregious, that is more than five years old.
Phil Gasteyer, general counsel at the Savings and Community Bankers of America, said having a uniform statute of limitations makes sense from a business standpoint.
The regulators, however, are not willing to concede the issue. "The defense bar will argue that 3M v. Browner should be applied to federal banking statutes," said Richard Steams, the deputy chief counsel for enforcement at the Office of Thrift Supervision. "Whether it will still must be decided-"
He said the courts must rule that the case specifically applies to banking law before the regulators will change their policies.
Robert Serino, deputy chief counsel at the Officials at the Office of the Comptroller of the Currency, said he believes the case applies to OCC civil money penalties. But, he said it doesn't apply to removal, cease and desist, or recovery actions.
Mr. Roderer agreed the 3M decision technically applies only to civil money penalties. But, he said he is confident the courts will extend the legal theory to include all punitive sanctions, including cases where the agencies seek to ban individuals from banking. The decision does not affect any cases that the Department of Justice decides to bring in U.S. District Court, Mr. Roderer said. "That's an entirely different set of statutes of limitations," he said. Mr. Roderer said he suspects the Solicitor General is waiting for a different circuit to decide the same issue in favor of the government before he brings the case to the high court. In the meantime, Mr. Roderer urged bankers to get Congress to revise the law. He said he favors a detailed statute of limitations for various administrative actions. "That should be spelled out." The case establishing the statute of limitations actually has nothing to do with banking. 3M discovered in the 1980s that it violated several chemical reporting laws. It confessed to the EPA, which turned around and hit the company with more than $1 million in penalties. 3M lawyers argued before the U.S. Court of Appeals for the District of Columbia in 1993 that it shouldn't have to pay. It said the EPA took too long to assess penalties. The appellate court agreed, ruling that a general five-year statute of limitations applies to administrative actions. However, it did not limit its ruling to the EPA. Instead, it said that the decision applies to all federal agency proceedings where punitive sanctions are at stake.