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The Seventh Circuit has granted an emergency stay of professional sanctions against Frank William Bonan II, the former chairman of Grand Rivers Community Bank, following his challenge to an FDIC enforcement action. Bonan alleges that the agency's administrative proceeding violated his constitutional rights.

In a one-page order issued Friday, a three-judge panel granted Bonan’s request, filed on New Year's Eve, to pause the FDIC’s December 17 decision barring him from the banking industry and imposing a $105,000 fine. The panel’s order noted that the FDIC did not oppose the motion but did not elaborate on its reasoning.

Constitutional Challenge to FDIC Proceedings
Bonan, represented by Thompson Coburn LLP, contends that the FDIC’s in-house proceeding violated his Seventh Amendment right to a jury trial, citing parallels with the U.S. Supreme Court's decision in SEC v. Jarkesy. In that case, the Court curtailed the SEC's use of administrative proceedings for enforcement actions, requiring them to be conducted in federal courts where jury trials are available. Bonan argues this precedent should extend to FDIC actions, which also involve civil penalties and regulate private transactions.

Bonan also asserts that the FDIC’s administrative law judges and leadership structure are unconstitutionally insulated from presidential oversight due to tenure protections, echoing similar arguments that led to the Supreme Court invalidating tenure protections at agencies like the Consumer Financial Protection Bureau.

FDIC’s Decision and Bonan’s Defense
The FDIC's sanctions stem from a 2021 administrative proceeding accusing Bonan of exposing the Illinois bank to risk through a $1.25 million loan intended to assist a struggling oil-drilling client nearly a decade ago. Bonan has denied any misconduct, labeling the FDIC's findings as factually unsupported.

While the FDIC agreed in a December 30 order to pause the fine, it declined to stay its prohibition on Bonan's work in the banking industry, which was set to take effect on January 16. Bonan argued that the ban would cause "irreparable harm," damaging his career, reputation, and ability to support his family.

Next Steps and Broader Implications
Bonan’s case is part of a growing push to challenge the constitutionality of in-house enforcement proceedings used by agencies like the FDIC. The outcome could have significant implications for regulatory practices across federal agencies.

The case, Frank William Bonan v. Federal Deposit Insurance Corp., case number 24-3296, is being heard in the U.S. Court of Appeals for the Seventh Circuit. Bonan is represented by Jan Paul Miller, Brian A. Lamping, and Layla F. Husen of Thompson Coburn LLP. The FDIC is represented by Joseph Brooks.