Stone v. Federal Deposit Insurance

179 F. 3d 1368 (Fed. Cir. 1999)

Facts

The FDI board removed Stone from his job as a bank examiner and the FDIC. After the decision was made, Stone found out that two memoranda were sent to the deciding judge regarding Stone’s dismissal decision. In a sworn affidavit, the judge stated that he would have removed Stone regardless of the ex parte communication. The ALJ reviewed whether the ex parte communication was a violation of the APA and concluded that it wasn’t, but did not apply any sort of “harmless error test.” Stone argues that the memoranda introduced, “new, highly prejudicial, and unchallenged charges and information against him.” Stone argues that the court should apply the harmless error test, which focuses “on whether the error is so likely to have prejudiced the deciding official that the proceeding should be void.” The government argues for the subjective test which focuses on whether there was new information that likely had a “harmful effect upon the outcome before the agency.”

Issue

Whether the ex parte memoranda constitutes an ex parte communication violation of the APA.

Analysis

Yes, held and vacated for remand. Public hearings for dismissals of public employees are important because they will reveal factual disputes which the employee can respond to and reveal the reasoning behind dismissal. Ex parte communication of new information undermines these goals. The ex parte communication must be substantial and so likely to cause prejudice “that it undermines the due process” guaranteed to the employee. Only new information can do this in an employee dismissal case.

“Ultimately, the inquiry of the board is whether the ex parte communication so substantial and so likely to cause prejudice that no employee can fairly be required to be subjected to a deprivation of property under such circumstances.” Because there was new information in this case, “Mr. Stone’s procedural due process rights may have been undermined.”

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