Tcf Nat'l Bank v. Bernanke

• Decision Date: 29 June 2011
• Docket Number: No. 11–1805.,11–1805.
• Citation: 643 F.3d 1158
• Parties: TCF NATIONAL BANK, Plaintiff–Appellant,v.Ben S. BERNANKE; Janet L. Yellen; Kevin M. Warsh; Elizabeth A. Duke; Daniel K. Tarullo; Sarah Bloom Raskin, the Board of Governors of the Federal Reserve System, in their official capacities; John Walsh, Comptroller of the Currency, in his official capacity, Defendants–Appellees.American Bankers Association; Consumer Bankers Association; Credit Union National Association; Financial Services Roundtable; Independent Community Bankers of America; Mid–Size Bank Coalition of America; State Bankers Associations; National Association of Federal Credit Unions; Economists and law and economics scholars; The Clearing House Association L.L.C., Amici on behalf of Appellant,Merchants Payment Coalition; Retail Litigation Center; MDL–1720 Class Plaintiffs, Amici on Behalf of Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

643 F.3d 1158

TCF NATIONAL BANK, Plaintiff–Appellant,

v.Ben S. BERNANKE; Janet L. Yellen; Kevin M. Warsh; Elizabeth A. Duke; Daniel K. Tarullo; Sarah Bloom Raskin, the Board of Governors of the Federal Reserve System, in their official capacities; John Walsh, Comptroller of the Currency, in his official capacity, Defendants–Appellees.American Bankers Association; Consumer Bankers Association; Credit Union National Association; Financial Services Roundtable; Independent Community Bankers of America; Mid–Size Bank Coalition of America; State Bankers Associations; National Association of Federal Credit Unions; Economists and law and economics scholars; The Clearing House Association L.L.C., Amici on behalf of Appellant,Merchants Payment Coalition; Retail Litigation Center; MDL–1720 Class Plaintiffs, Amici on Behalf of Appellee.

No. 11–1805.

United States Court of Appeals, Eighth Circuit.

Submitted: June 16, 2011.Filed: June 29, 2011.

Timothy D. Kelly, argued, Minneapolis, MN, Mark V. Meierhenry, William E. Blewett, Sioux Falls, SD, Sarah Elisabeth Bushnell, Minneapolis, MN, Benjamin R. Civiletti, William D. Coston, and Martin L. Saad, Washington, DC, on the brief, for appellant.

Lindsey Powell, argued, Mark B. Stern, on the brief, Washington, DC, for appellee.Seth P. Waxman, Steven P. Lehotsky, Wilmer Cutler Pickering, Gregory F. Taylor, Eric L. Richard, Karen M. Thomson, Rich Whiting, Washington, DC, Christopher R. Lipsett, Noah A. Levine, Pamela K. Bookman, Paul Saltzman, Rob Hunter, H. Rodgin Cohen, Matthew A. Schwartz, New York, NY, Roger W. Damgaard, James A. Power, Sioux Falls, SD, Carrie R. Hunt, Steven I. Zeisel, Arlington, VA, and Mike Cahill, Los Angeles, CA, on the brief, for amici curiae Clearing House Association, L.L.C., American Bankers Association, Consumer Bankers Association, Credit Union National Association, The Financial Services Roundtable, Independent Community Bankers of America, Mid–Size Bank Coalition of America, and National Association of Federal Credit Unions.Ronald A. Parsons, Jr., Sioux Falls, SD, and Todd J. Zywicki, Arlington, VA, on the brief, for amicus curiae Economists and Law and Economics Scholars.Joseph J. Witt, Eden Prairie, MN, on the brief, for amicus curiae State Bankers Associations.W. Stephen Cannon, Todd Anderson, Richard O. Levine, Washington, DC, Thomas K. Wilka, Sioux Falls, SD, Jeffrey I. Shinder, A. Owen Glist, New York, NY, on the brief, for amicus curiae The Retail Litigation Center, Inc.Douglas Kantor, Shannen W. Coffin, Washington, DC, on the brief, for amicus curiae Merchants Payments Coalition.K. Craig Wildfang, Thomas J. Undin, Minneapolis, MN, on the brief, for amicus curiae MDL–1720 Class Plaintiffs.Before MURPHY, MELLOY, and SMITH, Circuit Judges.MELLOY, Circuit Judge.

TCF National Bank sued to enjoin a portion of the Dodd–Frank Wall Street Reform Act of 2010 that will limit the rate some financial institutions may charge for processing debit-card transactions. At the outset of the proceedings, TCF moved for a preliminary injunction, and the district court ¹ denied the motion. We affirm.

I.

On July 21, 2010, Congress passed the Dodd–Frank Wall Street Reform and Consumer Protection Act. Pub.L. No. 111–203, 124 Stat. 1376 (2010). Section 1075 of the Act, known as the Durbin Amendment, amended the Electronic Fund Transfer Act, 15 U.S.C. § 1693 et seq., by adding several provisions regulating debit-card interchange fees. The new provisions authorize the Board of Governors of the Federal Reserve System (“Board”) to set the “interchange transaction fee that an issuer [of debit cards] may receive or charge with respect to an electronic debit transaction.” § 1693 o–2(a)(1). By statute, “[t]he amount of any interchange transaction fee that an issuer may receive or charge with respect to an electronic debit transaction shall be reasonable and proportional to the cost incurred by the issuer with respect to the transaction.” § 1693 o–2(a)(2).

The new provisions also charged the Board with promulgating regulations “to establish standards for assessing whether the amount of any interchange transaction fee ... is reasonable and proportional to the cost incurred by the issuer with respect to the transaction.” § 1693 o–2(a)(3)(A). In making this determination, the Board is to “consider the functional similarity between ... electronic debit transactions[ ] and ... checking transactions that are required within the Federal Reserve bank system to clear at par.” § 1693 o–2(a)(4)(A). The Board must further distinguish between “the incremental cost incurred by an issuer for the role of the issuer in the authorization, clearance, or settlement of a particular electronic debit transaction” and “other costs incurred by an issuer which are not specific to a particular electronic debit transaction.” § 1693 o–2(a)(4)(B). The latter costs “shall not be considered” by the Board. Id. Importantly, issuers with “assets” less than ten billion dollars are exempt from these regulations. § 1693 o–2(a)(6).

TCF is a national banking association with assets in excess of ten billion dollars. TCF issues debit cards along with its checking accounts and currently uses the Visa network to issue debit cards. Pursuant to a contract between TCF and Visa, Visa has the right to set the interchange rate, which by the district court's calculation, has averaged approximately forty-eight cents per transaction.

Concerned about the impact of these new provisions, which may result in a reduction of fees to twelve cents or less per transaction under proposed regulations by the Board, TCF filed suit to enjoin the Durbin Amendment. In its suit, TCF alleges that § 1693 o–2(a)(2), (a)(4), and (a)(6) are facially unconstitutional because these provisions will require the Board to set an interchange rate below the cost of providing debit-card services. TCF also alleges that these provisions arbitrarily exempt smaller issuers from the Board's rate regulations. This, according to TCF, violates TCF's due-process and equal-protection rights provided for in the Fifth Amendment.

At the outset of the proceedings, TCF moved for a preliminary injunction, and the district court denied the motion, concluding that TCF was unlikely to prevail on the merits. The district court reached this conclusion after finding that the challenged provisions of the Durbin Amendment were only subject to rational-basis review on both TCF's due-process and equal-protection claims and that the provisions passed this highly deferential standard of review. The district court further found that TCF did not have a sufficient property interest to raise a due-process challenge given that TCF's interest in future interchange fees was highly speculative because Visa retained the right to alter the fees at will and because the banking industry is highly regulated. TCF appeals, arguing that the district court abused its discretion in denying its motion for a preliminary injunction.

II.

“We review the district court's grant of a preliminary injunction for abuse of discretion, giving deference to the discretion of the district court.” Vonage Holdings Corp. v. Neb. Pub. Serv. Comm'n, 564 F.3d 900, 904 (8th Cir.2009). An abuse of discretion may occur when the district court rests its decision on clearly erroneous factual findings or erroneous legal conclusions. Coyne's & Co. v. Enesco, LLC, 553 F.3d 1128, 1131 (8th Cir.2009). In determining whether to issue a preliminary injunction against a duly enacted statute, the district court must consider: (1) whether the movant is “likely to prevail on the merits”; (2) the threat of irreparable harm to the movant; (3) the state of balance between this harm and the injury that granting the injunction will inflict on other parties litigant; and (4) the public interest. Planned Parenthood Minn., N.D., S.D. v. Rounds, 530 F.3d 724, 733 (8th Cir.2008); see also Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 113 (8th Cir.1981).

In this case, TCF is challenging the facial validity of the Durbin Amendment. “A facial challenge to a legislative Act is, of course, the most difficult challenge to mount successfully, since the challenger must establish that no set of circumstances exists under which the Act would be valid.” United States v. Salerno, 481 U.S. 739, 745, 107 S.Ct. 2095, 95 L.Ed.2d 697 (1987); see also Wash. State Grange v. Wash. State Republican Party, 552 U.S. 442, 449–50, 128 S.Ct. 1184, 170 L.Ed.2d 151 (2008) (reaffirming the Salerno test outside the context of certain First Amendment challenges). This is because facial challenges “run contrary to the fundamental principle of judicial restraint that courts should neither anticipate a question of constitutional law in advance of the necessity of deciding it nor formulate a rule of constitutional law broader than is required by the precise facts to which it is to be applied.” Wash. State Grange, 552 U.S. at 450, 128 S.Ct. 1184 (internal quotation marks omitted). With these principles in mind, we turn to TCF's arguments.

A.

TCF argues that the district court abused its discretion in denying TCF's motion for a preliminary injunction because the district court relied on erroneous legal and factual findings when concluding that TCF is not likely to prevail on its due-process claim. TCF specifically asserts that the court should have subjected the challenged provisions to a more stringent confiscatory-rate analysis and not a rational-basis test because the Durbin Amendment effectively limits how much TCF may charge for its debit-card services. TCF maintains that, under a confiscatory-rate analysis, no set of circumstances exists in which the challenged provisions would be constitutional because § 1693 o–2(a)(4)(B) requires the Board to set an interchange rate below the cost of providing debit-card services. TCF alleges that the rate must be below cost since § 1693 o–2(a)(4)(B) prevents the Board from factoring in necessary overhead...