Independent Community Bankers of America v. National Credit Union Administration

Filing 56

MEMORANDUM OPINION. Signed by District Judge James C. Cacheris on 01/24/2017. (mpha)

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
INDEPENDENT COMMUNITY BANKERS
OF AMERICA,
Plaintiff,
v.
NATIONAL CREDIT UNION
ADMINISTRATION,
Defendant.

)
)
)
)
)
)
)
)
)
)
)
)
)

M E M O R A N D U M

Case No. 1:16cv1141 (JCC/TCB)

O P I N I O N

Plaintiff Independent Community Bankers of America, a
trade association that represents community banks, brings suit
challenging regulations adopted by Defendant National Credit
Union Administration.

Defendant has filed a Motion to Dismiss

[Dkt. 18] contending, in relevant part, that Plaintiff’s suit is
time-barred and that Plaintiff lacks standing.
agrees.

The Court

Accordingly, the Court will grant Defendant’s Motion

and dismiss Plaintiff’s Complaint.
I. Background
Congress passed the Federal Credit Union Act, 12
U.S.C. § 1751, et seq., in the midst of the Great Depression.
The Act authorizes the chartering of federal credit unions –

member owned and democratically operated financial cooperatives
that provide services similar to those offered by banks.
Defendant is an administrative agency charged with overseeing
federally chartered credit unions and “administering the
[Federal Credit Union Act].”

Nat’l Credit Union Admin. v. First

Nat. Bank & Trust Co., 522 U.S. 479, 483 (1998).

Defendant’s

authority also extends to state-chartered credit unions that
elect to be insured by the National Credit Union Share Insurance
Fund.

See Credit Union Nat. Ass’n v. Nat’l Credit Union Admin.,

57 F. Supp. 2d 294, 296 (E.D. Va. 1995).
This case concerns regulations Defendant adopted
pursuant to 12 U.S.C § 1757a(a), a provision of the Act titled
“Limitation on member business loans.”

This portion of the

statute provides that “no insured credit union may make any
member business loan that would result in a total amount of such
loans outstanding at that credit union” to exceed the lesser of
“1.75 times the actual net worth of the credit union” or 12.25%
of the credit union’s assets.

Id.

The term “member business

loan” is defined as “any loan, line of credit, or letter of
credit, the proceeds of which will be used for a commercial,
corporate, or other business investment or venture, or
agricultural purpose.”

Id. § 1757a(c)(1)(A).

At issue here is

whether and to what extent this limitation applies to interests

2

in loans made to persons not members of a given credit union
that are acquired, but not originated, by that credit union.1
In 1999, Defendant issued its first rule interpreting
and implementing these provisions of the Act.
28,721 (May 27, 1999).

See 64 Fed. Reg.

The 1999 Rule provided that “[u]nless

otherwise exempt,” interests in loans acquired but not
originated by a credit union “are to be counted against the
aggregate loan limit for the participating credit union.” Id. at
28,725.

The Rule did not distinguish between interests in loans

made to members and loans made to nonmembers.
In 2003, Defendant issued a notice of proposed
rulemaking stating that it had “reconsidered its position
regarding the treatment of loan participations by purchasing
credit unions and propose[d] to exclude participation interests
from the calculation of the aggregate [member business loan]
limit.”

68 Fed. Reg. 16,450, 16,451 (Apr. 4, 2003).

The agency

ultimately stopped short of excluding all loan interests
acquired, but not originated, by a credit union from the
statutory cap.

Finding the statute’s language “lends itself to

several possible interpretations,” Defendant adopted a rule
distinguishing between interests in loans made to credit union
members and interests in loans made to nonmembers.
1

68 Fed. Reg.

Credit unions are authorized to purchase interests in
loans made by other lenders, or “participation interests,”
pursuant to 12 U.S.C. § 1757(5)(E) and 12 C.F.R. § 701.22.
3

56,537, 56,539, 56,543 (Oct. 1, 2003).

While interests in loans

made to members remained subject to the “Limitation on member
business loans” cap, the agency found that “purchases of
nonmember loans and participation interests . . . do not involve
the provision of member loan services, and the acquired loan
assets are not [member business loans].”

Id. at 56,544.

The agency recognized that nonmember loans are
“business loan asset[s] with all of the attendant risks,” and
noted that if abused, the new rule might provide a “loophole”
for credit unions.

Id. at 56,544.

Accordingly, Defendant

required credit unions to seek approval from the agency’s
Regional Director before purchasing an interest in a nonmember
business loan when, combined with the credit union’s member
business loans, doing so would cause the credit union to exceed
the statutory cap.

See id.

Defendant undertook its most recent rulemaking in
2015.

The agency primarily proposed to change the manner in

which it regulates member business loans, moving away from
“prescriptive underwriting criteria and waiver requirements in
favor of a principles-based approach to regulating commercial
loans.”

80 Fed. Reg. 37,898, 37,899 (July 1, 2015).

As part of

that process, the agency proposed to eliminate the requirement
that credit unions seek approval before purchasing interests in
nonmember loans when doing so would cause them to exceed the
4

statutory cap.

Id. at 37,909-10.

Instead, the purchase of such

interests would be subject to the same overarching principles
applicable to other commercial loans under the new regulations.
See id.

The notice of proposed rulemaking “emphasize[d] that a

credit union’s non-member commercial loans or participation
interests in non-member commercial loans made by another lender
continue to be excluded from the [member business loan]
definition and are not counted . . . in calculating the
statutory aggregate amount.”

Id.

In March of 2016, Defendant issued a final rule
adopting its earlier proposal.
2016).

81 Fed. Reg. 13,530 (Mar. 14,

The agency responded to public comments criticizing its

approach to loan participations, “emphasiz[ing] that [it]s
current approach with respect to [member business] loan
participations has been unchanged since 2003,” and stating that,
“[a]fter careful consideration of the public comments on this
issue, the Board continues to subscribe to the views articulated
in 2003 and has determined to adopt the proposed approach
without change.”

81 Fed. Reg. at 13,548-49.

Accordingly, for

purposes of the present suit, the only relevant change wrought
by the 2016 Rule was the elimination of the permission-topurchase requirement.

See id. at 13,549.

The relevant portions

of the 2016 Rule took effect on January 1, 2017.

5

On September 7, 2016, Plaintiff filed the instant
challenge to the 2016 Rule under the APA.

Plaintiff contends

that Defendant acted unlawfully in interpreting 12 U.S.C § 1757a
to exclude interests in nonmember business loans acquired by
credit unions from the statutory cap on member business loans.
See Compl. [Dkt. 1] ¶ 90.

On November 2, 2016, Defendant filed

the instant Motion to Dismiss [Dkt. 18] pursuant to Federal
Rules of Civil Procedure 12(b)(1) and 12(b)(6).
II. Legal Standard
A motion filed pursuant to Rule 12(b)(1) challenges
the Court’s subject matter jurisdiction over the pending action.
The burden of proving subject matter jurisdiction falls on the
plaintiff. McNutt v. General Motors Acceptance Corp., 298 U.S.
178, 189 (1936); Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.
1982).

Where, as here, “a Rule 12(b)(1) motion challenge is

raised to the factual basis for subject matter jurisdiction
. . . the district court is to regard the pleadings’ allegations
as mere evidence on the issue, and may consider evidence outside
the pleadings without converting the proceeding to one for
summary judgment.”

Richmond, Fredericksburg & Potomac R. Co. v.

United States, 945 F.2d 765, 768 (4th Cir. 1991).
“The purpose of a Rule 12(b)(6) motion is to test the
sufficiency of a complaint; importantly, [a Rule 12(b)(6)
motion] does not resolve contests surrounding the facts, the
6

merits of a claim, or the applicability of defenses.”

Edwards

v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999)
(citation omitted).

While the Court must accept well-pled

allegations of fact as true when ruling on a Rule 12(b)(6)
motion, the Court need not accept legal conclusions disguised as
factual allegations.
(2009).

Ashcroft v. Iqbal, 556 U.S. 662, 679-81

Moreover, “[l]aws – including statutes and formal rules

and regulations – are subject to judicial notice because they
are matters of public record and common knowledge.”

Ebersole v.

Kline-Perry, No. 1:12-cv-26, 2012 WL 2673150, at *3 (E.D. Va.
July 5, 2012).
III. Analysis
A. Timeliness
The Court begins its analysis with Plaintiff’s
Complaint.

Curiously, the Complaint makes little mention of the

regulatory changes wrought by the 2016 Rule.

Indeed, Plaintiff

dedicates only seven of the Complaint’s 90 paragraphs to the
Rule Plaintiff ostensibly challenges.

Instead, Plaintiff’s

Complaint is almost entirely addressed to Defendant’s 2003 Rule.
The relief Plaintiff requests is directed solely at overturning
changes in Defendant’s regulations traceable to the 2003 Rule,
to wit, the agency’s determination that “purchases of nonmember
loans and participation interests . . . do not involve the
provision of member loan services, and the acquired loan assets
7

are not [member business loans].”
also Compl. [Dkt. 1] ¶ 90.2

68 Fed. Reg. at 56,544; see

Plaintiff does not attack the

elimination of the permission-to-purchase requirement in and of
itself.
This is significant because a six-year statute of
limitations applies to lawsuits brought under the APA.

See 28

U.S.C. § 2401(a); Jersey Heights Neighborhood Ass’n v.
Glendening, 174 F.3d 180, 186 (4th Cir. 1999).

Any challenge to

the 2003 Rule should therefore have been filed – at the latest –
by October 1, 2009, six years after Defendant published its 2003
Rule.

Plaintiff’s suit would, under normal circumstances, be

time-barred to the extent it challenges Defendant’s 2003 Rule.

2

In relevant part, Plaintiff seeks “(1) a declaratory
judgment that NCUA acted contrary to law and arbitrarily and
capriciously in violation of the FCU Act and the Administrative
Procedure Act by adopting a rule that purports to exclude
certain commercial loans and interests in commercial loans
purchased by credit unions from the aggregate limit on ‘member
business loans’ imposed in 12 U.S.C. § 1757a; (2) a declaratory
judgment that NCUA acted contrary to law and arbitrarily and
capriciously in violation of the FCU Act and the Administrative
Procedure Act by adopting a rule that purports to treat a credit
union’s purchase of a commercial loan or interest in a
commercial loan from another lender as anything other than the
‘mak[ing]’ of a ‘member business loan’ within the meaning of 12
U.S.C. § 1757a; (3) an order invalidating and setting aside
NCUA's 2016 MBL Rule and related adopting release to the extent
they purport to treat acquired commercial loans and interests in
such loans that are not subject to a statutory exception as
anything other than a ‘member business loan’ for purposes of the
lending restriction of 12 U.S.C. § 1757a.” Compl. [Dkt. 1]
¶ 10.
8

See Jersey Heights Neighborhood Ass’n, 174 F.3d at 186; Hire
Order Ltd. v. Marianos, 698 F.3d 168, 170 (4th Cir. 2012).
Plaintiff appears to concede in its Opposition that
its challenge is directed to the 2003 Rule.
at 12-13.

See Opp. [Dkt. 25]

Plaintiff contends, however, that it may challenge

the 2003 Rule under the “reopening” doctrine.

That doctrine

holds that when an agency reconsiders a settled rule, aggrieved
parties may contest the agency’s decision not to change the
rule.

See Kennecott Utah Copper Corp. v. Dep’t of Interior, 88

F.3d 1191, 1214 (D.C. Cir. 1996).
The Court can find no Supreme Court or Fourth Circuit
precedent recognizing the reopening doctrine.
doctrine’s status in this Circuit is unsettled.

As such, the
Assuming that

the Court should recognize the doctrine, however, there is
little indication that it applies here.
“The reopening doctrine allows an otherwise stale
challenge to proceed because ‘the agency opened the issue up
anew,’ and then ‘reexamined . . . and reaffirmed its [prior]
decision.’”

P & V Enterprises v. U.S. Army Corps of Engineers,

516 F.3d 1021, 1023 (D.C. Cir. 2008) (quoting Pub. Citizen v.
Nuclear Reg. Comm’n, 901 F.2d 147, 150-51 (D.C. Cir. 1990))
(alterations in original).

“An explicit invitation to comment

on a previously settled matter, even when not accompanied by a
specific modification proposal, is usually sufficient to affect
9

a reopening.”

Nat’l Ass’n of Reversionary Prop. Owners v.

Surface Transp. Bd., 158 F.3d 135, 142 (D.C. Cir. 1998).

“The

doctrine only applies . . . where ‘the entire context’
demonstrates that the agency ‘ha[s] undertaken a serious,
substantive reconsideration of the [existing] rule.”

P & V

Enterprises, 516 F.3d at 1024 (citations omitted).
In support of its contention that Defendant reopened
the issues settled by its 2003 Rule, Plaintiff relies primarily
on two isolated sentences – one from the 2015 Notice of Proposed
Rulemaking, and one from the final 2016 Rule.3

As to the former,

Plaintiff points to the Notice’s general invitation to comment,
which states that “commenters should not feel constrained to
limit their comments to the issues discussed above” but “are
encouraged to discuss any other relevant [member business loan]
issues they believe [Defendant] should consider that are
consistent with and permissible under the existing statute.”
Fed. Reg. at 37,912.

80

Plaintiff claims that this reflects

Defendant’s intent to reconsider every regulation it has adopted
regarding member business loans, affecting a “regulatory reset”

3

The Court notes that Plaintiff dedicates less than a
paragraph of its Opposition to explaining what, specifically,
Defendant did to reopen its 2003 Rule. See Opp. [Dkt. 25] at
13. This effort is, on its face, insufficient to account for
the “entire context,” P & V Enterprises, 516 F.3d at 1024, of
the 2016 Rule.
10

that sweeps in all aspects of the 2003 Rule.

Opp. [Dkt. 25] at

13.
This is a slim reed.

By “encourag[ing] [commenters]

to discuss . . . relevant [member business loan] issues they
believe [Defendant] should consider,” 80 Fed. Reg. at 37,912
(emphasis added), Defendant did not suggest that it would
undertake “serious, substantive reconsideration,” P & V
Enterprises, 516 F.3d at 1024, of every regulation it had
previously adopted.

Merely welcoming general comments beyond

the scope of a proposed rulemaking does not affect a “regulatory
reset.”

“When an agency invites debate on some aspects of a

broad subject . . . it does not automatically reopen all related
aspects including those already decided.”

Nat’l Ass’n of

Reversionary Prop. Owners, 158 F.3d at 142.
Moreover, while the 2015 Notice of Proposed Rulemaking
proposed broad changes to the agency’s regulations, it also
suggested that the agency was specifically unwilling to
reconsider the aspects of the 2003 Rule Plaintiff challenges.
Defendant took pains to “emphasize that a credit union’s nonmember commercial loans or participation interests in non-member
commercial loans made by another lender continue to be excluded
from the [member business loan] definition and are not counted
. . . in calculating the statutory aggregate amount.”
Reg. at 37,909-10.

80 Fed.

This appears to be a disavowal of any intent
11

to reopen the 2003 Rule, notwithstanding Defendant’s invitation
for comment on member business loans generally.
Plaintiff next directs the Court’s attention to the
portion of the 2016 Rule in which the agency states that,
“[a]fter careful consideration of the public comments on this
issue, the Board continues to subscribe to the views articulated
in 2003 and has determined to adopt the proposed approach
without change.”

81 Fed. Reg. at 13,548-49.

This, Plaintiff

argues, demonstrates that Defendant did in fact reconsider its
earlier Rule.
The fact that the agency “careful[ly] consider[ed]
public comments” on a topic, however, does not affect a
reopening.

Where, as here, an agency merely “acknowledge[s]

receipt of . . . comment[s]” and “reaffirms its contrary
position,” that does not subject its settled regulations to
renewed challenge.

Kennecott Utah Copper Corp. v. U.S. Dep’t of

Interior, 88 F.3d 1191, 1213 (D.C. Cir. 1996); see also
Biggerstaff v. FCC, 511 F.3d 178, 186 (D.C. Cir. 2007) (“[A]n
agency [does not] reopen an issue by responding to a comment
that addresses a settled aspect of some matter, even if the
agency had solicited comments on unsettled aspects of the same
matter.”).

To hold otherwise would transform the reopening

doctrine into “a license for bootstrap procedures by which
petitioners can comment on matters other than those actually at
12

issue, goad an agency into a reply, and then sue on the grounds
that the agency had re-opened the issue.”

Am. Iron & Steel

Inst. v. U.S. E.P.A., 886 F.2d 390, 398 (D.C. Cir. 1989).
At oral argument, Plaintiff further called the Court’s
attention to new regulations from the 2016 rulemaking that
reference relevant aspects of Defendant’s 2003 Rule.
Defendant’s regulations now define “member business loan” to
exclude “[a]ny non-member commercial loan or non-member
participation interest in a commercial loan made by another
lender[.]”

12 C.F.R. § 723.8(b)(2).

Defendant similarly

adopted a new regulation defining “commercial loan” to include
“any loan, line of credit, or letter of credit . . . and any
interest a credit union obtains in such loans made by another
lender . . . for commercial, industrial, agricultural, or
professional purposes, but not for personal expenditure
purposes.”

Id. § 723.2.

Plaintiff takes the position that

because these new regulations mention the 2003 Rule, that Rule
has been “reopened.”
Plaintiff cites no authority to support this
proposition, and the Court finds the argument unpersuasive.
reopening doctrine applies where the context of a rulemaking
indicates an agency reconsidered the substance of an earlier
rule.

See P & V Enterprises, 516 F.3d at 1024.

Plaintiff

directs the Court’s attention to changes in Defendant’s
13

The

regulations that serve only to reiterate and entrench the
agency’s 2003 determination that “purchases of nonmember loans
and participation interests . . . do not involve the provision
of member loan services, and the acquired loan assets are not
[member business loans].”

68 Fed. Reg. at 56,544.

Merely

codifying an extant rule in part of a new regulation does not
effectuate a reopening.

If anything, this reflects the agency’s

view that its earlier rule is a settled to the point that it may
serve as a foundation for further rulemaking.
The Court notes further that the above does not
account for “the entire context” of the 2016 Rule.
Enterprises, 516 F.3d at 1024.

P & V

A survey of that context

indicates that Defendant did not undertake a “serious,
substantive reconsideration,” id., of the 2003 Rule.

The

changes proposed in the 2016 Rule presupposed the retention of
the 2003 Rule.

Indeed, Plaintiff’s pleadings present the 2016

Rule as the continuation of an unbroken trend toward
liberalizing regulations regarding credit union participation in
commercial loans beginning with, and building upon, the 2003
Rule.

See Compl. [Dkt. 1] ¶¶ 43-60.

Similarly, Plaintiff goes

to great lengths to paint Defendant as a “cheerleader” for
credit union participation in commercial loans, id. ¶ 79, then
inconsistently asserts that Defendant “serious[ly],
substantive[ly],” P & V Enterprises, 516 F.3d at 1024,
14

reconsidered its decision to permit credit unions to do so more
broadly.

Moreover, as discussed above, the agency’s 2015 Notice

of Proposed Rulemaking “emphasiz[ed]” its continued adherence to
the 2003 Rule, 80 Fed. Reg. at 37,909-10, and the final 2016
Rule likewise “emphasiz[ed]” that the agency’s views on the
topic “ha[ve] been unchanged since 2003.”

81 Fed. Reg. at

13,548.
In short, the reopening doctrine would not apply in
this instance even were the Court to recognize it.

Accordingly,

Plaintiff’s Complaint is time-barred to the extent it challenges
the substance of Defendant’s 2003 Rule.
Having reached this conclusion, it is not clear what
remains of Plaintiff’s suit.

Plaintiff’s Complaint makes

relatively little mention of the 2016 Rule; as noted earlier,
the relief Plaintiff requests is addressed entirely to the 2003
Rule.

See Compl. [Dkt. 1] ¶ 90.

Plaintiff does not argue that

Defendant committed an independent violation of the APA by
abandoning the permission-to-purchase requirement in the 2016
Rule.

Rather, it is Plaintiff’s position that the permission-

to-purchase requirement had no basis in the Federal Credit Union
Act from the start.

See id. ¶¶ 51-53; Opp. [Dkt. 25] at 5

(arguing that “the FCU Act does not permit such waivers”).
Stripped of its references to the 2003 Rule, Plaintiff’s
argument regarding the 2016 Rule is reduced to the claim that,
15

as a matter of policy, Defendant’s previous unlawful Rule was
better than its new unlawful Rule.
for relief under the APA.

This does not state a claim

The discussion above therefore

appears to dispose of this matter entirely.
Assuming, however, that some residuum of Plaintiff’s
challenge to the 2016 Rule remains, the Court finds that
Plaintiff lacks standing to bring it.
B. Standing
To establish standing, Article III generally requires
that a plaintiff demonstrate “it has suffered an ‘injury in
fact’ that is (a) concrete and particularized and (b) actual or
imminent, not conjectural or hypothetical.”

Friends of the

Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167,
180–81 (2000).

Plaintiff relies on the doctrine of

“associational standing,” which applies only if one or more of
Plaintiff’s members can establish standing on an individual
basis.

See Retail Indus. Leaders Ass’n v. Fielder, 475 F.3d

180, 186 (4th Cir. 2007).

In order to demonstrate the injury

component of standing, Plaintiff must therefore show that harm
to its members is certainly impending, as opposed to merely
possible, under Defendant’s 2016 Rule.
Int’l USA, 133 S. Ct. 1138, 1147 (2013).

See Clapper v. Amnesty
Plaintiff bears a

particularly heavy burden in making this showing, as neither it,

16

nor its members, is subject to the challenged regulation.

See

Lujan v. Defs. of Wildlife, 504 U.S. 555, 562 (1992).
Plaintiff claims that its members can demonstrate the
injury component of standing because “economic actors ‘suffer an
injury in fact when agencies lift regulatory restrictions on
their competitors or otherwise allow increased competition’
against them.”

Sherley v. Sebelius, 610 F.3d 69, 72 (D.C. Cir.

2010) (quoting La. Energy & Power Auth. v. FERC, 141 F.3d 364,
367 (D.C. Cir. 1998)).

Even under the doctrine of “competitor

standing,” however, “[i]t remains indispensable . . . that the
increase in competition and the corresponding injury are
‘imminent’ and not merely ‘speculative.’”

Delta Air Lines, Inc.

v. Exp.-Imp. Bank of United States, 85 F. Supp. 3d 250, 262
(D.D.C. 2015); see also El Paso Nat. Gas Co. v. F.E.R.C., 50
F.3d 23, 27 (D.C. Cir. 1995) (“The nub of the ‘competitive
standing’ doctrine is that when a challenged agency action
authorizes allegedly illegal transactions that will almost
surely cause petitioner to lose business, there is no need to
wait for injury from specific transactions to claim standing.”)
(emphasis added).

The doctrine does not apply when agency

action constitutes at most “the first step in the direction of
future competition.”

New World Radio, Inc. v. F.C.C., 294 F.3d

164, 172 (D.C. Cir. 2002).

17

It is not clear at this point that Defendant’s 2016
regulation will result in increased competition against
Plaintiff’s member banks.

Credit unions were able to compete

with banks in the commercial loan arena before the 2016 Rule.
Indeed, Plaintiff represents that they have done so vigorously.
See, e.g., Opp. [Dkt. 25] at 5-7.

The 2016 Rule on its face

does not permit additional competition.

All it does is dispense

with the requirement that, after taking on a certain amount of
member business loans, a credit union obtain permission to
purchase an additional interest in a nonmember business loan.
Plaintiff does not contend that Defendant frequently
denied such permission prior to adopting the 2016 Rule.

Indeed,

at the hearing on this matter, Plaintiff’s counsel would not so
much as hazard a guess as to how often Defendant denied
permission under the old Rule.

In the absence of direct

evidence, Plaintiff might have presented circumstantial evidence
suggesting that the permission-to-purchase requirement has
served as a meaningful barrier to credit union participation in
nonmember business loans.

Plaintiff, however, argues at length

in its various filings that the opposite is true.

Plaintiff

claims that Defendant has acted as a “cheerleader” for credit
union participation in commercial loans, Compl. [Dkt. 1] ¶ 79,
and contends that the adoption of the 2003 Rule occasioned an
“increase in commercial lending by credit unions . . .
18

correspond[ing] to [Defendant]’s unlawfully lax enforcement of
the statutory cap on credit union commercial lending.”

Opp.

[Dkt. 25] at 5; see also Cole Decl. [Dkt. 25-1] ¶ 12 (claiming
that Defendant has been “historically lax” in “enforc[ing] . . .
the statutory [member business loan] cap”). In short, there is
no evidence now before the Court to suggest that Defendant
regularly – or indeed ever – denied permission under the
previous requirement.

It is therefore unclear that the removal

of this requirement will cause Plaintiff’s members to face
increased competition.
Furthermore, the evidence before the Court suggests
that credit unions have only infrequently been required to ask
Defendant’s permission to acquire an interest in nonmember
business loans.

The final 2016 Rule states that Defendant

“processed 336 and 225 [member business loan] related waiver
requests, in 2014 and 2015 respectively.”
13,552.

81 Fed. Reg. at

In the context of the national financial system, these

numbers are quite small.

Plaintiff, for example, boasts “nearly

6,000” member banks “operat[ing] 24,000 locations worldwide
. . . hold[ing] $1.4 trillion in assets, $1.2 trillion in
deposits, and $950 billion in loans to consumers, small
businesses, and farmers.”

Compl. [Dkt. 1] ¶¶ 11, 13.

A study

hosted on Plaintiff’s website finds that “the vast majority of
credit unions are nowhere near their credit limit: Only 1.6
19

percent of credit unions are at or above the 12.5 percent cap,
and over 70 percent of credit unions have no member business
loans at all[.]”

Ike Brannon, An Analysis of the Impact of

Expanding the Ability of Credit Unions to Increase Commercial
Loans, at 2 (Nov. 2012), http://tinyurl.com/j5l6f7e.

While

Plaintiff claims that “hundreds of credit unions are ‘bumping up
against’ the statutory cap and clamoring for additional relief,”
Opp. [Dkt. 25] at 6, the source it cites states only that,
nationwide, “148 credit unions . . . had business loans of more
than 10% of assets” and were “essentially capped or will reach
the cap in the next twelve months.”
at 6.

See Opp. Exh. E [Dkt. 25-6]

It therefore appears that the permission-to-purchase

requirement has in recent years been relevant only to a
relatively small number of transactions.

For this reason as

well it is not clear that the removal of this requirement “will
almost surely cause [Plaintiff’s members] to lose business.”

El

Paso Nat. Gas Co., 50 F.3d at 27 (emphasis added).4

4

At oral argument, Plaintiff’s counsel conceded that it
is unknown whether there will be an appreciable increase in
competition against Plaintiff’s member banks, and that not every
loan a credit union makes is necessarily a lost opportunity for
Plaintiff’s member banks. Plaintiff’s counsel nonetheless
contended that Plaintiff can still demonstrate associational
standing because “any increase in competition as a result of the
rule,” no matter how small, “would be a basis for standing.”
This overstates the competitor standing doctrine. The doctrine
applies where “a challenged agency action authorizes allegedly
illegal transactions that will almost surely cause [the
plaintiff] to lose business[.]” El Paso Nat. Gas Co., 50 F.3d
20

Finally, apart from Defendant’s regulations, the
member business loan cap is subject to numerous statutory
exceptions that permit credit unions to compete with banks in
commercial loans.

For example, credit unions that are

“chartered for the purpose of making, or that ha[ve] a history
of primarily making, member business loans,” or that “serve[ ]
predominantly low-income members” are not subject to the member
business loan cap.

12 U.S.C. § 1757a(b).

The term “member

business loan” is likewise defined to exclude certain categories
of loans, such as loans “made to a borrower or an associated
member that has a total of all such extensions of credit in an
amount equal to less than $50,000,” and loans that are “fully
insured or fully guaranteed by . . . any agency of the Federal
Government or of a State.”

Id. § 1757a(c)(1)(B).

For this

reason as well, it is does not appear that the permission-topurchase has served as a meaningful barrier to credit union
participation in commercial loans.
Defendant counters that “an increase in commercial
lending by credit unions and credit union participation
syndicates is the direct, logical, and intended result of” the
elimination of the permission-to-purchase requirement.

Opp.

at 27 (emphasis added). Based on counsel’s representations, an
incremental increase in nonmember commercial loan participation
by credit unions would not “almost surely” cause Plaintiff’s
members to lose business.
21

[Dkt. 25] at 14.

That is not so.

The requirement was never

intended to curtail commercial lending by credit unions.
Rather, it was instituted to safeguard the soundness of the
credit union system.

See 81 Fed. Reg. at 13,549.

The new

regulations replace the permission-to-purchase requirement with
a principles-based approach, requiring credit unions to perform
the same sort of safety evaluation previously performed by the
agency before participating in nonmember business loans.
id. at 13,557.

See

The rule is intended to provide credit unions

with greater “flexibility and individual autonomy” in providing
services they already perform, id. at 13,530, not to increase
credit union participation in commercial lending. Moreover, the
2016 Rule cautions that use of this autonomy to “circumvent the
statutory aggregate limit will not be tolerated,” and that
credit unions who do so will be subject to “commensurate
supervisory action.”

Id. at 13,549.

Defendant’s argument

therefore rests upon the assumption that credit unions will do
precisely what the 2016 Rule forbids them to do.

This is,

again, mere speculation.
Plaintiff further submits affidavits attesting to the
competition its members presently face from credit unions.
Opp. Exhs. 10-12 [Dkts 10, 11, 12].

This anecdotal data

“attempt[s] to answer the wrong question.”
Inc., 85 F. Supp. 3d at 265.

Delta Air Lines,

The competition discussed in
22

See

Plaintiff’s affidavits is not traceable to the 2016 Rule, and
tends only to reinforce the Court’s conclusion that the
permission-to-purchase requirement did not meaningfully curtail
credit union competition with banks – which, again, was not the
object of that regulation.

The affidavits therefore do not show

that removing that requirement will lead Plaintiff’s members to
face increased competition and “almost surely cause [them] to
lose business.”

El Paso Nat. Gas Co., 50 F.3d at 27.

Plaintiff next claims that “the announcement of . . .
the 2016 MBL Rule and the expectation in the markets that the
exclusion is about to go into effect have an actual, current
adverse effect on the franchise value of community banks and
therefore on their ability to attract investors and to obtain
additional capital on reasonable terms.”

Opp. [Dkt. 25] at 15.

Plaintiff, however, provides no support for this bald assertion.
Given the relatively small market share of credit unions, see
Opp. Exh. F [Dkt. 25-7] at 6 (noting that “[b]anks control about
94% of the assets and credit unions about 6.5%”), and the
relatively minor changes in the 2016 Rule to the regulation of
nonmember business loan participations, the Court is unwilling
to accept this conclusory statement without more.

The burden is

on Plaintiff to demonstrate standing, see Lujan, 504 U.S. at
561, and Plaintiff cannot meet that burden with its mere say-so
alone.

Moreover, even assuming that some of Plaintiff’s members
23

have recently encountered difficulties in attracting investors,
Plaintiff has put forth no evidence to demonstrate that those
difficulties are attributable to the 2016 Rule.

The Court is

therefore unable to say that any such difficulties are fairly
traceable to Defendant and not to market forces caused by some
“third party not before the court.”

Id. at 560.

In light of the foregoing, the Court must conclude
that, to the extent Plaintiff’s challenge is not time-barred,
Plaintiff lacks standing to maintain this action.

Accordingly,

that Court will grant Defendant’s Motion and dismiss Plaintiff’s
Complaint.

The Court will further deny Plaintiff’s Conditional

Motion for Scheduling Order [Dkt. 44] as moot.5
The Court notes, however, that even had Plaintiff
established its standing and the timeliness of its suit, the
Court would still find that the challenged regulations pass
muster under the APA and Chevron.
C. Plaintiff’s APA Claim
The two-step inquiry of Chevron, U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837, 842–43

5

Plaintiff argues further that to dismiss this case
before receiving the full administrative record would be
premature. Plaintiff, however, fails to explain what in the
administrative record might be relevant to the Court’s analysis.
The arguments before the Court are, for the most part, purely
legal. The Court can think of no reason why a review of the
administrative record is necessary in light of the foregoing
analysis.
24

(1984), asks first whether Congress has “directly spoken to the
precise question at issue.”

Plaintiff contends that it has, and

that the term “member business loan” unambiguously refers to
loans made both to members of a given credit union and
nonmembers alike.

In support of this proposition, Plaintiff

points out that credit unions may only acquire interests in
loans where “[t]he borrower becomes a member of one of the
participating credit unions before the purchasing federally
insured credit union purchases a participation interest in the
loan.”

12 CFR § 701.22(b)(4); see also 12 U.S.C. § 1757(5).

Because the recipient of any loan in which a credit union
participates will therefore ultimately be a member of some
credit union, Plaintiff argues that the term “member business
loan” encompasses all possible loan purchases and participations
by a credit union, including those where the borrower is not a
member of that specific credit union.

Defendant thus acted

unlawfully in exempting participation interests in and purchases
of nonmember business loans from the statutory cap on “member
business loans.”
This is at best a plausible, if creative, construction
of the statute.

As Defendant points out, the relevant portions

of the Federal Credit Union Act appear to use the terms
“membership” and “member” to refer to membership in a specific
credit union, not membership in a credit union generally.
25

See

12 U.S.C. §§ 1757a, 1759.

Moreover, Plaintiff’s interpretation

of the statute contravenes an established canon of statutory
construction by rendering the word “member” mere surplusage.
See In re Total Realty Mgmt., LLC, 706 F.3d 245, 251 (4th Cir.
2013).

If all business loans made by credit unions are “member”

business loans, including that qualifier in the statute would
serve no purpose.

The use of that term is not merely an

oversight, but appears throughout the statute’s legislative
history.

See, e.g., S. Rep. No. 105-193 (1998), at *10.

This

legislative history repeatedly uses the term “member” to refer
to membership in a specific credit union.

See, e.g., id.

(“There are exceptions from the limit on member business loans
for insured credit unions that are chartered for the purpose of,
or that have a history of primarily making member business loans
to members[.]”).

In light of the above, Plaintiff has not

demonstrated that Congress has “directly spoken to the precise
question at issue.”

Chevron, 467 U.S. at 842–43.

Having established that the statute is ambiguous, the
Court next asks whether the challenged regulations are “based on
a permissible construction of the statute.”
at 843.

This is a forgiving standard.

Chevron, 467 U.S.

An agency need not have

adopted “the best interpretation of the statute,” Atl. Mut. Ins.
Co. v. C.I.R., 523 U.S. 382, 389 (1998), or the “most natural
reading,” Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 702
26

(1991), but need only have adopted an interpretation that is not
“flatly contradicted” by the law’s plain text.

Dep’t of

Treasury, I.R.S. v. Fed. Labor Relations Auth., 494 U.S. 922,
928 (1990).
Defendant’s determination that “purchases of nonmember
loans and participation interests . . . do not involve the
provision of member loan services, and the acquired loan assets
are not [member business loans],” 68 Fed. Reg. at 56,544, easily
meets that standard.

As discussed above, the statute refers

throughout to “member business loans,” and generally uses the
term “member” to refer to membership in a specific credit union.
See 12 U.S.C. §§ 1757a, 1759.

It is therefore a natural – or at

the very least permissible – construction of the statute to
interpret the term “member business loan” to mean a business
loan made by a credit union to one or more of its members.
Although the term “member business loan,” as defined in the
statute, does not expressly differentiate between members and
nonmembers, see id. § 1757a(c)(1)(A), “[i]n settling on a fair
reading of a statute, it is not unusual to consider the ordinary
meaning of a defined term, particularly when there is dissonance
between that ordinary meaning and the reach of the definition.”
Bond v. United States, 134 S. Ct. 2077, 2091 (2014).

Here, the

ordinary meaning of the term “member business loan” supplies the

27

distinction not expressly stated in the term’s statutory
definition.6
In short, the challenged regulations reflect a
reasonable interpretation of the Federal Credit Union Act.

Even

if the Court was to reach the merits of Plaintiff’s APA claims,
the Court would still dismiss this case.
IV. Motions to Participate as Amici Curaie
Also pending before the Court are (1) the Motion for
Leave to File Brief as Amici Curiae [Dkt. 33] filed by the
Credit Union National Association and National Association of
Federal Credit Unions; (2) the Motion for Leave to File Brief as
Amicus Curiae Supporting Plaintiff [Dkt. 42] filed by the
American Bankers Association; and (3) the Motion for Leave to
File as Amicus Curiae Supporting Plaintiff [Dkt. 49] filed by
the Executive Council of State Community Bankers Associations.
The latter two Motions seek leave to file amicus briefs during
the summary judgment stage of these proceedings.

The former

Motion is accompanied by a brief largely addressed to the merits
of Plaintiff’s case – grounds not necessary to the Court’s
disposition of Defendant’s Motion to Dismiss.

6

In light of the

Plaintiff suggests that this principle applies only to
criminal statutes. The Court, however, is unable to discern any
such limitation in text of the opinions cited. See Bond, 134 S.
Ct. at 2091; Johnson v. United States, 559 U.S. 133, 139–40
(2010). Plaintiff does not direct the Court’s attention to any
passage indicating that this principle is so limited.
28

foregoing, the Court finds that the various Motions to
participate as amici curiae are moot.

Accordingly, they will be

denied.
V. Conclusion
For the foregoing reasons, the Court will grant
Defendant’s Motion [Dkt. 18] and dismiss Plaintiff’s Complaint.
The Court will further deny Plaintiff’s Conditional Motion for
Scheduling Order [Dkt. 44] and the various Motions to
participate as amici curiae [Dkts. 33, 42, 49].

An appropriate

order will issue.

January 24, 2017
Alexandria, Virginia

/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE

29