Builders Bank v. FDIC
Filed opinion of the court by Judge Easterbrook. The judgment is VACATED, and the case is REMANDED for proceedings consistent with this decision. Richard A. Posner, Circuit Judge; Frank H. Easterbrook, Circuit Judge and Diane S. Sykes, Circuit Judge. [6812833-1]  [16-2852]
United States Court of Appeals
For the Seventh Circuit
FEDERAL DEPOSIT INSURANCE CORPORATION,
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 15 C 6033 — James B. Zagel, Judge.
ARGUED JANUARY 4, 2017 — DECIDED JANUARY 19, 2017
Before POSNER, EASTERBROOK, and SYKES, Circuit Judges.
EASTERBROOK, Circuit Judge. Builders Bank is insured and
regulated by the Federal Deposit Insurance Corporation,
which conducts a “full‐scope, on‐site examination” every 12
to 18 months. 12 U.S.C. §1820(d). After an examination in
June 2015 the FDIC assigned the Bank a rating of 4 under the
Uniform Financial Institutions Rating System. The parties
call this a CAMELS rating, after the System’s six compo‐
nents: capital, asset quality, management, earnings, liquidity,
and sensitivity. The highest rating is 1, the lowest 5. The
Bank contends in this suit under the Administrative Proce‐
dure Act that its rating should have been 3 and that the low‐
er rating is arbitrary and capricious. But the district court
dismissed the suit for want of jurisdiction, ruling that the as‐
signment of ratings is committed to agency discretion by
law. 5 U.S.C. §701(a)(2).
Some circuits have called rulings under §701(a)(2) juris‐
dictional, see, e.g., Flint v. United States, 906 F.2d 471, 476 (9th
Cir. 1990); Lunney v. United States, 319 F.3d 550, 551 (2d Cir.
2003); Tsegay v. Ashcroft, 386 F.3d 1347, 1349 (10th Cir. 2004),
but ours is not among them. When a private party seeks ju‐
dicial review of administrative action, 5 U.S.C. §702 and 28
U.S.C. §1346(a)(2) supply subject‐matter jurisdiction. If there
are no standards for judicial review (the usual meaning of
“committed to agency discretion by law,” see Heckler v.
Chaney, 470 U.S. 821, 830 (1985)), then the court dismisses the
suit on the merits because the plaintiff can’t show that the
agency’s action was unlawful. That’s the conclusion of Vahora
v. Holder, 626 F.3d 907, 916–17 (7th Cir. 2010). Accord,
Oryszak v. Sullivan, 576 F.3d 522, 526 (D.C. Cir. 2009); Ochoa v.
Holder, 604 F.3d 546, 549 (8th Cir. 2010). Older decisions such
as Flint precede, or do not discuss, the Supreme Court’s
modern effort to distinguish truly jurisdictional rules from
case‐processing doctrines. See, e.g., United States v. Kwai Fun
Wong, 135 S. Ct. 1625 (2015); Sebelius v. Auburn Regional Medi‐
cal Center, 133 S. Ct. 817 (2013).
Decades ago this court sometimes used the word “juris‐
diction” to refer to all doctrines that foreclose judicial review.
Arnow v. NRC, 868 F.2d 223 (7th Cir. 1989), is one illustration.
But loose usage does not establish a holding, see Reed Else‐
vier, Inc. v. Muchnick, 559 U.S. 154, 161 (2010), or survive the
Justices’ recent insistence that “jurisdiction” means a tribu‐
nal’s adjudicatory competence, not whether a litigant has an
ironclad defense. Section 701(a)(2), which prevents review of
matters committed to agency discretion by law, does not re‐
fer to or limit §702, which creates subject‐matter jurisdiction
for claims under the APA. And when the Supreme Court has
considered arguments under §701(a)(2), it has done so on the
merits; it has not ordered the cases remanded with instruc‐
tions to dismiss for want of jurisdiction. See, e.g., Lincoln v.
Vigil, 508 U.S. 182 (1993); Webster v. Doe, 486 U.S. 592 (1988).
Section 701(a)(2) is no more a limit on subject‐matter juris‐
diction than are doctrines of absolute and qualified immuni‐
ty, statutes of limitations, and many other rules that prevent
courts from deciding whether the defendant acted properly.
Maintaining the distinction between jurisdictional and
other rules is important, because courts must enforce the
limits on subject‐matter jurisdiction even when the litigants
prefer a decision on the merits. If §701(a)(2) curtails jurisdic‐
tion, then courts must decide in every case under the APA
whether some statute or doctrine provides the agency with
discretion. The court would have to raise the issue on its
own, comb the statute books for grants of discretion, and so
on, even if the agency never contended that its action came
within §701(a)(2). Congress could require this, but the lan‐
guage of §701(a)(2) does not foreclose the possibility of
waiver or forfeiture. We do not see a reason to depart from
Vahora’s conclusion that the extent of agency discretion con‐
cerns the merits, not jurisdiction—unless a particular statute
designates the subject as jurisdictional.
The distinction between jurisdiction and the merits mat‐
ters here not only because the district court (wrongly) con‐
cluded that it lacks jurisdiction but also because the FDIC
has bypassed two other procedural reasons why it might
prevail. First, APA review normally is limited to final agency
actions. See, e.g., FTC v. Standard Oil Co. of California, 449 U.S.
232 (1980). Assignment of a CAMELS rating does not appear
to be a final decision. It might be the basis of an administra‐
tive order directing a bank to change certain practices or de‐
sist from others, see 12 U.S.C. §1818(b), (c), (d), but the FDIC
has not issued such an order to the Bank. The CAMELS rat‐
ing affects how much a bank must pay for deposit insurance,
but the Bank has not asked the court to order the FDIC to
lower its rates. Second, the Bank failed to take advantage of
the opportunity to have the FDIC’s Supervision Appeals Re‐
view Committee review the rating. See 77 Fed. Reg. 17055–2
(Mar. 23, 2012).
As we understand the law, however, the absence of a fi‐
nal decision would be just another reason to dismiss the
suit—provided that there is a live controversy between the
Bank and the FDIC. The effect of CAMELS ratings on insur‐
ance premiums creates a concrete stake that makes the cur‐
rent dispute justiciable. Cf. Sackett v. EPA, 566 U.S. 120 (2012)
(dispute about classification of property as a wetland is justi‐
ciable even though additional steps may be required before a
final remedy). The possibility of pre‐enforcement review
under decisions such as Sackett and Association of Data Pro‐
cessing Service Organizations, Inc. v. Camp, 397 U.S. 150 (1970),
shows that a litigant‐specific final decision is not a jurisdic‐
tional requirement. That the Bank may have sought judicial
review prematurely therefore does not require a court to
dismiss the suit when the agency has acquiesced in immedi‐
Apart from its jurisdictional argument, the FDIC main‐
tains that the CAMELS rating is unreviewable because it has
discretion to set appropriate levels of capital. It relies partic‐
ularly on 12 U.S.C. §3907(a)(2): “Each appropriate Federal
banking agency shall have the authority to establish such
minimum level of capital for a banking institution as the ap‐
propriate Federal banking agency, in its discretion, deems to
be necessary or appropriate in light of the particular circum‐
stances of the banking institution.” We shall assume that the
agency’s discretion is so unconfined that the law commits
the subject to administrative discretion under §701(a)(2). So
Frontier State Bank v. FDIC, 702 F.3d 588, 593–97 (10th Cir.
2012), holds, and the Bank does not ask us to disagree.
Instead the Bank reminds us that CAMELS stands for
“capital, asset quality, management, earnings, liquidity, and
sensitivity”. Each of the six factors is rated separately on a
scale of 1 to 5, and the rating as a whole aggregates those six
factors. The FDIC’s statement of policy, see 62 Fed. Reg. 752
(Jan. 6, 1997), explains the process. Suppose the FDIC’s team
of examiners were to conclude that the Bank had adequate
capital deserving a rating of 1 but that other components
were unfavorable, leading to an overall rating of 4. The ex‐
aminers may be right or wrong about those other issues, but
a district court could ask whether the FDIC’s final rating was
arbitrary, or supported by substantial evidence, without
making any inroad on the agency’s discretion to evaluate a
bank’s capital adequacy.
That’s what happened in Frontier State Bank, which in the
course of reviewing a cease‐and‐desist order reviewed man‐
agement, liquidity, and interest‐rate‐sensitivity issues while
concluding that capital adequacy is unreviewable. 702 F.3d
at 597–604. The sort of issues reviewed in Frontier State Bank
affect CAMELS ratings. If those subjects could be reviewed
there, notwithstanding the Tenth Circuit’s conclusion that
capital adequacy is within the FDIC’s discretion, they can be
reviewed in this litigation as well.
Indeed, it would be possible for a court to review the cap‐
ital rating itself without transgressing §3907(a)(2). Suppose
the FDIC were to decide that Builders Bank needs $5 million
in net capital in order to operate safely but has only $4 mil‐
lion. Section 3907(a)(2) puts the $5 million floor beyond judi‐
cial questioning. But the statute does not insulate the agen‐
cy’s math. If the Bank were to contend that the examiners
found that it fell short of $5 million because they had mis‐
takenly treated a $1 million asset as a $1 million liability,
turning $6 million of net capital into $4 million by error, a
court would not impinge on the statutory discretion by in‐
sisting that assets go in one column of the balance sheet and
liabilities in the other. Putting assets in the liability column is
not part of a bank examiner’s remit.
Builders Bank insists that it takes the FDIC’s capital re‐
quirements as given and seeks to challenge only its applica‐
tion of the “asset quality, management, earnings, liquidity,
and sensitivity” factors. The FDIC maintains that the Bank is
just trying to disguise a challenge to a capital decision pro‐
tected by §3907(a)(2). The district judge did not decide which
side is right about this, and the papers filed in this court do
not enable us to do so reliably. The district court should take
up this topic on remand. All we hold today is that the pres‐
ence of capital as one of six components in a CAMELS rating
does not necessarily mean that the rating as a whole is com‐
mitted to agency discretion for the purpose of §701(a)(2). We
do not decide whether one or more components of a
CAMELS rating other than capital may be committed to
agency discretion; the parties have not briefed that question.
The judgment is vacated, and the case is remanded for
proceedings consistent with this decision.
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