Picture this: the Treasury Department has just ordered you, a banker, to pay back money you never had. But the multimillion-dollar question is: Can the Treasury legally order you to pay up?

Certainly the Treasury, as well as all bank regulators, can order bankers to pay restitution for violating a law or for conducting an unsound banking practice. That is permitted by the Financial Institutions Reform, Recovery and Enforcement Act of 1989, a statute granting bank regulators broad administrative powers.

Yet broad as this statute is, regulators' restitution power is meant to be limited. Firrea cabins the power to two circumstances: when a banker is unjustly enriched by her actions, or when she acts recklessly.

Courts have interpreted Firrea as adopting the traditional definition of recklessness. But they are split in defining unjust enrichment. Some courts use the phrase's traditional definition and require that the banker wrongly profit from her actions. Other courts have cast tradition aside and created a new definition that grants regulators limitless restitution powers. Under this definition, unjust enrichment occurs not just when the banker wrongly gains, but also when anybody is harmed by the banker's actions.

But all is not lost for bankers. Through appellate procedures, they can fight and overturn regulators' restitution orders.

Firrea's "unjust enrichment" standard should be traditionally defined. Unjust enrichment has traditionally meant that the defendant has "receiv[ed] something that properly belongs to the plaintiff." Its analytical core centers on the defendant's illegitimate gain, "not [on] the plaintiff's loss." Under this traditional meaning, proving the unjust enrichment standard requires that the banker received and retained a benefit from somebody and that it would be unjust to allow the banker to retain that benefit.

Congress intended this traditional definition of unjust enrichment. For one thing, the phrase's traditional meaning is a term of art — courts have always interpreted unjust enrichment as requiring the defendant to have personally gained. Therefore courts should presume Congress intended to use the same definition with Firrea.

In addition, eliminating the personal gain requirement from the definition of unjust enrichment would violate the legal principle that a law should not be interpreted to render any of its provisions meaningless. When regulators seek restitution from bankers, another's loss is always involved. So if regulators need only prove another's loss to justify a restitution order, they need never prove the banker acted recklessly. Thus, the "reckless" provision becomes meaningless. Regulators will just prove the easier standard rather than take on the more difficult challenge of proving that the banker acted recklessly.

Contrast that result with what happens when unjust enrichment is defined traditionally. If the banker personally gained, regulators could use the unjust enrichment provision. If not, regulators could justify restitution orders only through recklessness. No provision is rendered meaningless.

Some courts have taken this view. The D.C. Circuit took it in Rapaport v. US Department of Treasury, and the Seventh Circuit probably would too, given its pre-Firrea analysis in Larimore v. Comptroller of the Currency.

The Fifth and the Ninth Circuits, however, have rejected this approach. Rather than adopting unjust enrichment's traditional definition for Firrea, they crafted a new one. Under this new definition, unjust enrichment occurs when the banker's actions caused another's loss.

Attempting to justify this new definition, the Fifth Circuit, in Akin v. Office of Thrift Supervision Department of Treasury, read Firrea "[as] suggest[ing] that unjust enrichment has a broader connotation than in traditional contract law." But unclear is how the statute suggested this. The court offered a quotation from legislative history as support for its conclusion, which reads: "It is the Committee's intent … that this [restitution] power be used only in appropriate cases, for example, where the institution-related party has unjustly enriched himself at the institution's expense."

Readers are left wondering just how this "suggests" unjust enrichment includes cases where the banker has not personally benefited. The passage merely mentions unjust enrichment, and it arguably appears to require personal gain. Saying that a "party has unjustly enriched himself" seems tantamount to saying the party personally benefitted.

Regardless, the circuit courts are split on defining unjust enrichment. But unlike most splits, lawyers and bankers need not worry over where they fall along this divide.

Firrea gives them a choice of circuits for judicial review: either the circuit where the bank's home office is located or Washington, D.C. Therefore, if a regulator orders a banker to make restitution when the banker has not acted recklessly and has not personally gained anything, that banker should leave home and head to the capital.

Jason Ohta isspecial counsel and a member of the white-collar criminal defense, corporate investigations and regulatory compliance division of Duane Morris's Trial Practice Group. Dan Terzian is an associate at Duane Morris and practices in the area of litigation.