In summary, the challenger must prove that the regulator`s action is invalid because it was “arbitrary and capricious.” What does that mean? Black`s Law Dictionary defines “arbitrary and capricious” as “[a] intentional and inappropriate act without regard to or ignoring facts or laws.” Admittedly, it is a difficult burden for the challenger. Let`s look at some examples. Napa orders the courts to invalidate all actions of the authority that are “[a]rbitrary or capricious or characterized by an abuse of judgment,” NRS 233B.135(3)(f). The APA orders the courts to quash a lawsuit filed by an agency that is “arbitrary, capricious, abusive judgment, or otherwise inconsistent with the law.” 5 U.S.C. § 706(2)(A). Unless judicial review is further restricted by law, this arbitrary or capricious test serves as the basis for challenging a final administrative decision. Recently, the New York Department of Health and Human Services attempted to adopt a “soda ban” that would have limited the portion size of sugar-sweetened beverages, and its validity was quickly questioned. After a detailed review of health records and statistics (and likely due to consumer outrage), a state court judge declared the law invalid because it did not apply equally to all food and beverage sellers, and exempted certain beverages that contained even more sugar than sodas. This is a rare case where a judge found that the regulatory measures taken were so inappropriate given the cases that the law was considered arbitrary and capricious. In particular, however, this is not a case related to the FI.
Example: Paul and Myra, both 30, are involved in a controversial custody case. Both parents are able to have custody of the child, so the judge must review all relevant information and decide what is in the best interests of the child. Myra mentioned the fact that when Paul was 16, he pleaded guilty to possession of marijuana. Solely because of Paul`s earlier conviction, the judge granted Custody to Myra. Paul appealed, arguing that the judge`s decision was arbitrary and capricious, that his conviction was irrelevant nearly 20 years earlier, and that there was no reasonable basis for the decision. The judges of the Court of Appeal will render the decision. Arbitrary and capricious is a standard of judicial review and appeal, often observed in administrative law. Under this Standard, a lower court`s conclusion is not disturbed unless it has no reasonable basis or the judge has ruled without reasonable cause or consideration of the circumstances. When your IF is faced with real or proposed regulatory measures, the experienced professionals at Styskal, Wiese & Melchione can help you plan a “real” business and legal strategy. We regularly receive calls from clients about various actions taken by their regulators and are asked what legal rights the financial institution (“FI”) may have to challenge these actions.
In 2002, the FSB launched a “leverage strategy” for investments, in which long-term investments were financed by short-term borrowing. During its regular reviews, the FDIC has repeatedly warned of specific risk factors that need to be mitigated. After the FSB repeatedly failed to adequately address regulators` concerns, the FDIC issued an injunction in 2008 regarding the bank`s investment strategy. The FSB appealed and the case eventually landed in Oklahoma District Court in December 2012. As the FDIC had repeatedly warned and documented its concerns about the bank`s insufficient capital, interest rate risk management, and liquidity, it was found that its approach to issuing an injunction was not arbitrary and capricious. Being in a bad mood means having an unpredictable, sudden and irresponsible change in attitude or behavior. In November 2011, the Office of the Comptroller of the Currency (OCC) filed a notice of its intention to impose a penalty of $100,000 for civilian money (“CMP”) on former T-Bank CEO Patrick Adams. The OCC`s “beef” with Adams was that T Bank had used many “uncertain and unhealthy” practices focused on payment processing services offered to commercial bank customers to create checks made remotely. After a very careful review of the file (which included a 155-page report), a federal administrative judge ruled that T-Bank/Adams had not acted in an uncertain and unhealthy manner and that the CMP was unjustifiably considered arbitrary and capricious. The key factors appear to be that the supervisory authority was aware of the bank`s activities and had approved it at least informally during several multi-year audits. until, suddenly, it was decided not to approve it anymore. Adams supported the “paper trail” because it reflected many previous interactions with the regulator on the details of payment processing services, risk mitigation factors associated with the bank, and OCC policy advice.