Am. Bankers Ass'n v. United States

• Decision Date: 08 August 2019
• Docket Number: 2018-1341
• Citation: 932 F.3d 1375
• Parties: AMERICAN BANKERS ASSOCIATION, Washington Federal, N.A., individually and on behalf of all others similarly situated, Plaintiffs-Appellants v. UNITED STATES, Defendant-Appellee
• Court: U.S. Court of Appeals — Federal Circuit

932 F.3d 1375

AMERICAN BANKERS ASSOCIATION, Washington Federal, N.A., individually and on behalf of all others similarly situated, Plaintiffs-Appellants

v.UNITED STATES, Defendant-Appellee

2018-1341

United States Court of Appeals, Federal Circuit.

Decided: August 8, 2019

Stephen Joseph Obermeier, Wiley Rein LLP, Washington, DC, argued for plaintiffs-appellants. Also represented by Claire J. Evans, Michael E. Toner.

Eric Peter Bruskin, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Joseph H. Hunt, Robert E. Kirschman, Jr., Kenneth M. Dintzer, Claudia Burke ; Katherine H. Wheatley, Board of Governors of the Federal Reserve System, Washington, DC.

Before Wallach, Chen, and Hughes, Circuit Judges.

Hughes, Circuit Judge.

This case arises out of legislation amending the statutory rate for dividend payments on Federal Reserve Bank stock. The Federal Reserve Act of 1913 set the dividend rate at six percent per year, which remained in effect until Congress amended the dividend provision in 2016. The amendment effectively reduced the dividend rate for certain stockholder banks from the fixed six percent rate to a lower variable rate. American Bankers Association and Washington Federal, N.A. sued the United States in the Court of Federal Claims, arguing that banks who subscribed to Reserve Bank stock before the amendment are entitled to dividends at the six percent rate. The complaint alleged that, by paying dividends at the amended statutory rate, the United States breached a contractual duty or, in the alternative, effected a Fifth Amendment taking. The trial court dismissed the complaint under Rules of the U.S. Court of Federal Claims 12(b)(6) for failure to state a claim. American Bankers and Washington Federal now appeal. Because the complaint does not allege facts establishing the existence of a contract or an unconstitutional taking, we affirm.

I

A.

We begin with a brief overview of the Federal Reserve System and its statutory origins. The Federal Reserve Act of 1913, Pub. L. No. 63-43, ch. 6, 38 Stat. 251 (1913),¹ established a system to oversee banking operations and promote greater economic stability. The Federal Reserve System includes the Federal Reserve Board of Governors, see id ., §§ 10-11, 38 Stat. 260–63, and twelve regional Reserve Banks, see id . § 2, 38 Stat. 251–52. The Board exercises broad regulatory supervision over the Reserve Banks, which serve as banks to the U.S. government and to commercial banks who are members of the Federal Reserve System.

The Act sets forth the conditions under which commercial banks may join the Federal Reserve System. One of the conditions of membership is that member banks must "subscribe" to the stock of their regional Reserve Bank in an amount "equal to six per centum of the paid-up capital stock and surplus of [the] applicant bank ...." § 5, 38 Stat. 257. Every national bank² is required to join the system and subscribe to Reserve Bank stock. § 2, 38 Stat. 252. Other financial institutions, such as state banks, are permitted but not required to apply for membership and subscribe to stock. § 9, 38 Stat. 259.

Reserve Bank stock is "divided into shares of $100," which "shall not be transferred or hypothecated." § 5, 38 Stat. 257. From 1913 to 2015, the Act provided that "the stockholders of the [Reserve] bank shall be entitled to receive an annual dividend of six per centum on the paid-in capital stock ...." § 7, 38 Stat. 258.

On December 4, 2015, Congress passed the Fixing America’s Surface Transportation Act (FAST Act), which authorized substantial appropriations for surface transportation infrastructure. See Pub. L. No. 114–94, 129 Stat. 1312. The FAST Act included an amendment to the statutory dividend rate for Reserve Bank stock owned by member banks with consolidated assets of more than $10 billion. Under the amended dividend provision, these banks would receive a variable dividend rate equal to the lesser of: (1) the rate of the 10-year Treasury note or (2) six percent. See § 32203, 129 Stat. 1739 (codified as amended at 12 U.S.C. § 289(a)(1) ).

B.

Prior to 2013, Washington Federal operated as a federally chartered savings and loan association. On May 29, 2013, Washington Federal received approval from the Office of the Comptroller of the Currency to convert to a national bank, contingent on, inter alia , Washington Federal applying for membership in the Federal Reserve System.

On July 8, 2013, Washington Federal submitted an application for Reserve Bank stock to the Reserve Bank of San Francisco (BSF). A letter from BSF, dated July 17, 2013, informed Washington Federal that its application and payment for stock had been processed and enclosed an Advice of Holdings for 479,610 shares of BSF stock. The letter further noted that "[d]ividends are paid at the statutory rate of 6 percent per annum, or $1.50 per share semi-annually." J.A. 65.

From 2013 to 2015, Washington Federal received dividend payments on its stock at a rate of six percent per year. After the FAST Act took effect on January 1, 2016, Washington Federal received dividends at the rate of the 10-year Treasury note. In 2016, Washington Federal received dividends totaling $502,471.53, reflecting an annual rate of approximately two percent.

C.

Washington Federal and American Bankers Association³ filed a complaint against the United States in the Court of Federal Claims on February 9, 2017.⁴ The complaint alleged that, by paying dividends at a rate lower than six percent in 2016, the government breached a contractual duty to member banks that subscribed to Reserve Bank stock before December 4, 2015. The complaint also asserted, in the alternative, that the government’s conduct effected a Fifth Amendment taking.

The government filed a motion to dismiss for lack of standing under RCFC 12(b)(1) and failure to state a claim under RCFC 12(b)(6). The Court of Federal Claims determined that American Bankers failed to meet the requirements for associational standing because the damages requested would require individualized proof for each association member. The court found that Washington Federal had standing but dismissed all counts of the complaint under RCFC 12(b)(6) for failure to state a claim. Washington Federal and American Bankers now appeal the court’s dismissal of the claims and its standing determination. We have jurisdiction under 28 U.S.C. § 1295(a)(3).

II

We review de novo whether the Court of Federal Claims properly dismissed a complaint for failure to state a claim upon which relief may be granted. Frankel v. United States , 842 F.3d 1246, 1249 (Fed. Cir. 2016). To avoid dismissal under RCFC 12(b)(6), a plaintiff "must allege facts ‘plausibly suggesting (not merely consistent with)’ a showing of entitlement to relief." Acceptance Ins. Cos., Inc. v. United States, 583 F.3d 849, 853 (Fed. Cir. 2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 557, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). In reviewing a motion to dismiss, we accept as true the complaint’s well-pled factual allegations; however, we are not required to accept the asserted legal conclusions. Id .

For the reasons set forth below, we conclude that the trial court did not err in dismissing Washington Federal’s breach of contract and takings claims under RCFC 12(b)(6).⁵

A.

First, we address Washington Federal’s breach of contract claim. The complaint asserts that the government breached an implied-in-fact or express contract with Washington Federal by paying dividends at a rate lower than six percent in 2016. Washington Federal alleges that an implied-in-fact contract exists because the Federal Reserve Act constitutes an offer by the government, which Washington Federal accepted by submitting its application and payment for Reserve Bank stock. Alternatively, Washington Federal contends that an express contract was formed based on its application for stock, which was a contractual offer that the government accepted by approving the application and issuing stock.

There are four requirements to form a contract binding upon the government: "(1) mutuality of intent to contract; (2) lack of ambiguity in offer and acceptance; (3) consideration; and (4) a government representative having actual authority to bind the United States in contract." Anderson v. United States , 344 F.3d 1343, 1353 (Fed. Cir. 2003). These requirements apply to both express and implied-in-fact contracts. Id . at 1353 n.3. "To satisfy its burden to prove such a mutuality of intent, a plaintiff must show, by objective evidence, the existence of an offer and a reciprocal acceptance." Id .

For both its implied-in-fact and express contract theories, Washington Federal relies largely on the Federal Reserve Act as evidence of the government’s intent to contract. Under its implied-in-fact contract theory, the Act was an offer to contract; under its express contract theory, the Act was an invitation to receive offers to contract. Under either theory of contract formation, Washington Federal argues that the Act contemplates a contractual agreement between member banks and the government. Because Washington Federal failed to allege facts establishing the existence of a contract with the government, we determine that the trial court did not err in dismissing this claim.

1.

"[A]bsent some clear indication that the legislature intends to bind itself contractually, the presumption is that ‘a law is not intended to create private contractual or vested rights but merely declares a policy to be pursued until the legislature shall ordain otherwise.’ " Nat’l R.R. Passenger Corp. v. Atchison Topeka & Santa Fe Ry. Co. , 470 U.S. 451,...