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Former Edinburg Teachers Credit Union CEO Jeffrey Moats, who allegedly caused the institution’s $4 million loss, asked the full panel of judges on a federal appeals court to rehear his case challenging the constitutionality of the NCUA’s administrative authority.
The request came after a three-judge panel from the 5th U.S. Circuit Court of Appeals in New Orleans unanimously upheld a lower court ruling in August that allowed the NCUA to proceed with administrative charges.
The federal agency accused Moats of alleged bank fraud, embezzlement, obstruction of an examination and falsifying documents during his tenure as CEO of the Edinburg, Texas-based credit union. The federal agency is seeking restitution of at least $4 million to the credit union and a civil money penalty of $1 million.
Earlier this month, Moats asked that the (en banc), or full-panel (17 judges) of the federal appeals court, rehear his case because the three-judge panel did not address the constitutional questions regarding NCUA administrative authority.
“This case presents the ‘exceptional[ly] importan[t]’ question, whether jurisdiction stripping and channeling statutes like 12 U.S.C. 1786 (which governs enforcement actions by the NCUA under the Federal Credit Union Act) are unconstitutional as applied,” Moats’ filing stated. “The Panel and the district court were asked to, but did not, address the constitutionality of stripping and channeling statutes.”
Moats’ filing argued the NCUA administrative authority strips him of his constitutional rights for the charges against him to be heard before a neutral judge and jury in district federal court. The federal agency’s process also channeled his appeal to a circuit appeals court should an administrative law judge rule against him.
Last week, the New Civil Liberties Alliance in Arlington, Va., filed an amicus curiae (friend of the court) brief urging the full panel to rehear Moats’ case. The organization also asked the court to revisit a similar case, Burgess v. Federal Deposit Insurance Corporation. In that case, the FDIC accused former bank executive Ronald Burgess of misconduct, seeking to ban him from the industry and fine him millions. Burgess sued in federal court before the administrative process began, arguing the FDIC’s process was unconstitutional — mirroring Moats’ challenge to the NCUA.
The three-judge panel did not consider Moats’ constitutional arguments because it limited its review to a jurisdictional issue.
“To prevent the NCUA from conducting its enforcement action, Moats filed a complaint in federal district court in which he urged various constitution theories,” the Appeals Court wrote. “But these merits are not before us. The only question before us is whether the district court erred when it dismissed Moats’ complaint for lack of subject matter jurisdiction. It did not, so we affirm.”
The NCUA is expected to file its brief in response to Moats’ rehearing request after the government shut down is resolved, according to court filings.
Moats initially filed his lawsuit in Galveston, Texas, soon after the NCUA’s administrative enforcement action that was initiated in April 2023. U.S. District Judge Jeffrey Vincent Brown dismissed the case in April 2024, leading to Moats’ appeal.
The appeals court also agreed with the lower court’s finding that federal courts lack jurisdiction once the NCUA formally initiates an enforcement action, as it did in April 2023.
"The NCUA asserts that Congress has expressly precluded district court jurisdiction over all claims, including constitutional ones, that may affect a NCUA proceeding," Judge Brown wrote in his ruling. "The court agrees. While courts generally have jurisdiction over all civil cases arising under federal law, Congress may leapfrog district courts by channeling claims through administrative review and directly to the federal appellate courts."
Peter Strozniak can be reached at pstrozniak@cutimes.com.
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