Bowling v. Block, C-2-84-135.

• Decision Date: 06 February 1985
• Docket Number: No. C-2-84-135.,C-2-84-135.
• Citation: 602 F. Supp. 667
• Parties: George W. BOWLING, et al., Plaintiffs, v. John R. BLOCK, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

602 F. Supp. 667

George W. BOWLING, et al., Plaintiffs, v. John R. BLOCK, et al., Defendants.

No. C-2-84-135.

United States District Court, S.D. Ohio, E.D.

February 6, 1985.

Gary R. Dumm, Stephen E. Carter, Circleville, Ohio, for plaintiffs.

Gary L. Norton, Farm Credit Admin., Washington, D.C., Thomas E. Palmer, Squire, Sanders & Dempsey, Columbus, Ohio, for defendants.

OPINION AND ORDER

KINNEARY, District Judge.

Plaintiffs, various entities engaged in the farming industry, have filed this action against numerous defendants alleging violations of the Farm Credit Act, 12 U.S.C. § 2001 et seq., and the regulations promulgated under it, and the Truth-in-Lending Act, 15 U.S.C. § 1601 et seq. Plaintiffs have also attached, pursuant to this Court's pendant jurisdiction, several state causes of action. The defendants in this action are John R. Block, Secretary of the United States Department of Agriculture, Donald E. Wilkinson, Governor of the Farm Credit Administration, the Farm Credit Administration, individual members of the Federal Farm Credit Board, the Fourth Farm Credit District, The Federal Intermediate Credit Bank of Louisville, The Federal Land Bank of Louisville, individual board members of the Fourth Farm Credit District, and the Columbus Production Credit Association.¹ This matter is currently before the Court on the defendants' motions to dismiss.

STATEMENT OF THE CASE

Plaintiffs, in this action, are essentially seeking a full-scale review of the present conditions under which the Farm Credit System is operated. Specifically, plaintiffs charge that the defendants, who constitute the Farm Credit System, have failed to act in accordance with the purposes for which the Farm Credit Act was promulgated. In fact, plaintiffs go so far as to assert that the defendants, in failing to act in a manner consistent with the intent of the Farm Credit Act,

... have unlawfully, wrongfully, and intentionally usurped powers not granted by the Farm Credit Act and abused and misused powers granted by the Farm Credit Act.

The Farm Credit Act, 12 U.S.C. § 2001 et seq., created the Farm Credit System.

The Farm Credit System was created for the specific purpose of improving the "income and well-being" of American farmers and ranchers. To achieve this objective, the System was intended to supply "sound, adequate, and constructive credit and closely related services" specifically tailored to the peculiar needs of the farming community. Further, the debtor-participants were encouraged, through stock ownership in the creditor-institutions, to participate in the management, ownership and control of the System. Daley v. Farm Credit Administration, 454 F.Supp. 953 (D.Minn. 1978). In objecting to the manner in which it is operated, plaintiffs argue that the current Farm Credit System

... does not operate to provide all of the benefits intended by the legislation and is not responsive to the credit needs of Plaintiffs and Plaintiffs have suffered corresponding substantial injury and damages.

In addition to their allegations that the defendants have violated their duties created by the Farm Credit Act, plaintiffs also allege that the defendants have violated their duties created by the federal Truth-in-Lending Act, 15 U.S.C. §§ 1601 et seq. Plaintiffs broadly allege that the defendants failed to make certain disclosures required by Regulation Z, 12 C.F.R. §§ 226.1 et seq. Specifically, plaintiffs assert that the defendants' conduct surrounding their loan transactions with plaintiffs amounted to a failure

... to provide Disclosure Statements setting forth with particularity the terms and conditions of the subject notes and mortgages.

Further, plaintiffs charge that the defendants failed to disclose the interest rates which they actually were charging plaintiffs.

Finally, plaintiffs assert numerous state law causes of action which they attach to this action pursuant to this Court's pendant jurisdiction. First, plaintiffs allege that the defendants breached their contractual obligations to improve the income and well-being of the farming community. Plaintiffs assert that such obligations are implicit in the "Congressional declaration of policy and objectives" section of the Farm Credit Act, 12 U.S.C. § 2001. Second, plaintiffs allege that the defendants breached a contract with plaintiffs because the stock which plaintiffs were required to purchase as a prerequisite for obtaining credit through the Farm Credit System did not pay dividends, appreciate in value or provide plaintiffs with an effective vote, and caused plaintiffs borrowing costs to exceed those costs for which the loan contracts provided. Third, plaintiffs allege that the defendants breached "substantial" fiduciary duties which were implicitly created under the Farm Credit Act and which are evidenced by the unique relationship existing between plaintiffs and defendants. Finally, plaintiffs allege that, as shareholders in defendants' organizations, they are entitled to share in the profits derived by such organizations through their functions as lending institutions. With respect to plaintiffs' final state law claim, it is charged that the defendants have failed to fulfill their duty "to provide credit to shareholder/borrowers at the `lowest reasonable cost.'"²

DISCUSSION

The defendants in this action may be, and should be for the purpose of addressing the subject motions to dismiss, separated into two groups. The first group of defendants is the Federal defendants. This group consists of Secretary Block of the Department of Agriculture, Donald Wilkinson, Governor of the Farm Credit Administration, the Farm Credit Administration, the Federal Farm Credit Board and its individual members. The second group of defendants consists of the remaining defendants. The Court will address both groups of defendants separately. The Court will begin by addressing the nonfederal defendants' motion to dismiss.

I.

Plaintiffs' first claim against the nonfederal defendants is that they have violated numerous specific sections of the Farm Credit Act. The nonfederal defendants respond to plaintiffs' allegations by arguing that plaintiffs cannot maintain their claims because the Farm Credit Act does not create a private right of action. It is clear that the Farm Credit Act does not contain an express provision granting such a right. Plaintiffs maintain, however, that, notwithstanding this lack of an express provision, such a right is implicit within the Act.

In Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1978), the Supreme Court addressed the issue of whether an implied private right of action exists with respect to a federal statute.

In determining whether a private remedy is implicit in a statute not expressly providing one, several factors are relevant. First, is the plaintiff "one of the class for whose especial benefit the statute was enacted," ... that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? ... Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? ... And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?

Id. at 78, 95 S.Ct. at 2088. Fortunately, with respect to the Farm Credit Act, at least one other Federal Court has thoroughly analyzed the four-factor Cort v. Ash test to determine whether a private right of action may be implied. In Hartman v. Farmers Production Credit Association of Scottsburg, No. 81-163-C (S.D. Ind. Mar. 18, 1983), it was determined that an implied private right of action did not exist under the Farm Credit Act. In making its determination, the court concluded:

The Farm Credit Act does not expressly provide a private cause of action for violation of its provisions, nor can one be implied.... Even assuming the Hartmans fall within the class for whose especial benefit the Farm Credit Act was enacted, the other three criteria are not met. Congress did not intent sic to provide a federal remedy, a private cause of action is not necessary to attain the underlying purpose of the Act, and the plaintiff's cause of action is one traditionally relegated to state law. The Court certainly would not condone the conduct alleged here, but the Hartmans have an adequate remedy in the state court.

Id. at 12.

Despite the somewhat differing contexts, this Court must concur with the Hartman Court's conclusion. It is readily apparent that the Farm Credit Act merely established the machinery by which its purpose, to augment the amount of credit available to the farming community, would be effected. It does not create specific enforceable rights which would necessitate the existence of a private right of action. Id. at 10. Further, the Act intimates that the specific entities it creates for the purpose of providing the needed credit — the production credit associations, the federal land bank associations and the banks for cooperatives — are to be operated much like any other private lending institution. Therefore, whatever disputes arise between plaintiffs and the nonfederal defendants must be resolved in the same manner that such a dispute would be resolved if the defendants were common banks or savings and loans.

The typical case in which the issue of whether a federal statute contains an implied private right of action involves a statute which "... prohibits ... some conduct, or which at least ostensibly protects the rights of a certain class of persons...." Marx v. Centran Corp., 747 F.2d 1536, 1544 (6th Cir.1984). With respect to the Farm Credit Act, it is apparent that the class of persons targeted as the immediate beneficiary consists of farmers and ranchers. However, the...