Commonwealth v. Home Federal Savings and Loan Association, No. 2007-CA-002353-MR (Ky. App. 10/31/2008)
| Decision Date | 31 October 2008 |
| Docket Number | No. 2007-CA-002384-MR.,No. 2007-CA-002353-MR.,2007-CA-002353-MR.,2007-CA-002384-MR. |
| Parties | COMMONWEALTH of Kentucky, Ex Rel. The Office of Financial Institutions; Cordell G. Lawrence, Executive Director (OFI)<SMALL><SUP>1</SUP></SMALL>, Appellants v. HOME FEDERAL SAVINGS AND LOAN ASSOCIATION; Members Choice Credit Union; Beacon Credit Union; Service One Credit Union; C&O Credit Union; Greater Kentucky Credit Union, Inc.; Kentucky Employees Credit Union, Appellees and Members Choice Credit Union; Beacon Credit Union; Service One Credit Union; C&O Credit Union; Greater Kentucky Credit Union, Inc.; Kentucky Employees Credit Union, Appellants v. Home Federal Savings and Loan Association, Appellee. |
| Court | Kentucky Court of Appeals |
Stuart E. Alexander, III, William J. Walsh, Kathleen M. W. Schoen, Louisville, Kentucky, Briefs for Appellants, Commonwealth of Kentucky, Ex Rel. The Office of Financial Institutions; Cordell G. Lawrence, Executive Director (OFI).
F. Ryan Keith, Public Protection Cabinet, Frankfort, Kentucky, Oral Argument for Appellants, Commonwealth of Kentucky, Ex Rel. The Office of Financial Institutions; Cordell G. Lawrence, Executive Director (OFI).
David T. Wilson II Radcliff, Kentucky, Brief and Oral Argument for Appellants/Appellees, Members Choice Credit Union; Beacon Credit Union; Service One Credit Union; C&O Credit Union; Greater Kentucky Credit Union, Inc.; Kentucky Employees Credit Union.
Burl McCoy, Lizbeth Ann Tully, Lexington, Kentucky, Briefs for Appellee, Home Federal Savings and Loan Association.
Lewis Paisley Lexington, Kentucky, Oral Argument for Appelleee, Home Federal Savings and Loan Association.
Thomas L. Canary, Jr. Louisville, Kentucky, Brief for Amicus Curiae, Kentucky Credit Union League.
Alice G. Keys, Covington, Kentucky, Brief for Amicus Curiae, Credit Union National Association.
Before: KELLER and WINE, Judges; LAMBERT,2 Senior Judge.
The Commonwealth of Kentucky, ex rel. The Office of Financial Institutions (OFI), appeals from a declaratory judgment of the Franklin Circuit Court which rejected the agency's interpretation of Kentucky Revised Statutes (KRS) 286.6-107 as allowing community or geographic charters for state credit unions. OFI and the intervening credit unions now appeal, arguing that Home Federal Savings and Loan (Home Federal) lacked standing to bring this action and failed to exhaust its administrative remedies. We agree with the trial court that Home Federal had standing to bring this action and was not required to pursue this matter through administrative proceedings. We further find Home Federal is not barred from bringing this action by the doctrine of laches, and that there were no relevant issues of fact which precluded summary judgment. On the substantive issue, we conclude that the trial court's interpretation of KRS 286.6-107 is more consistent with the plain language of the statute than OFI's interpretation. Therefore, the trial court correctly found that OFI is not authorized to grant community- or geographic-based charters to state credit unions. Hence, we affirm.
The relevant facts of this action are not in dispute. OFI charters, regulates, and supervises banks, trust companies, savings and loan associations, consumer loan companies, investment and industrial loan companies, and credit unions in Kentucky. In 1984, the General Assembly enacted the current version of KRS 290.107 (now KRS 286.6-107), which defines membership for credit unions chartered and regulated by the OFI. Since the enactment of the statute, OFI has allowed community and geographic fields of membership for credit unions.
On May 31, 2006, Home Federal filed a declaratory judgment action against OFI in Franklin Circuit Court. Home Federal is a federally chartered thrift located in Ashland, Kentucky. Home Federal alleged that OFI has acted outside of the scope of its authority by allowing community-based charters because community (or geographic) fields of membership are not authorized under KRS 286.6-107. Home Federal further alleged that this action in excess of its authority violates the separation of powers doctrine by allowing OFI to exercise legislative power in violation of Sections 27 and 28 of the Kentucky Constitution. OFI filed a motion to dismiss, arguing that Home Federal lacks standing to challenge the agency's statutory interpretation allowing geographic fields of membership. The trial court denied the motion on October 26, 2006.
Thereafter, a number of credit unions regulated by OFI collectively filed a motion for leave to intervene as defendants. The credit unions, namely Members Choice Credit Union; Greater Kentucky Credit Union, Inc.; Beacon Credit Union; C&O Credit Union; Service One Credit Union; and the Kentucky Employee's Credit Union, alleged that the OFI had previously granted each of them permission to amend their charters to provide geographic fields of membership. Thus, they asserted that they would be adversely affected by the declaratory relief sought by Home Federal. Home Federal did not object to the motion to intervene, which the trial court granted on March 19, 2007.
The matter then proceeded to cross-motions for summary judgment. In an order entered on November 2, 2007, the trial court granted summary judgment in favor of Home Federal. The court first found that Home Federal was not required to exhaust administrative remedies before bringing this action. The court further found that OFI's interpretation of KRS 286.6-107 was not supported by the plain language of the statute or its legislative history. Consequently, the court concluded that OFI was not authorized to allow state-chartered credit unions to have geographic fields of membership.
Thus, the court prospectively enjoined OFI from approving credit union bylaws allowing geographic fields of membership. The court further enjoined the intervening credit unions from "accepting new members whose only basis for membership is a `common bond of interest' that is based on geography." However, the court also stated that this injunction does not apply to any credit union members who joined the credit unions prior to the entry of the order. OFI appealed from this order, and the intervening credit unions filed a separate notice of appeal. These appeals are now consolidated before this Court.
In its appeal, OFI first argues that Home Federal lacked standing to bring this action. In Lujan v. Defenders of Wildlife, 504 U.S. 555, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992), the United States Supreme Court set out the "irreducible constitutional minimum of standing" in three elements:
First, the plaintiff must have suffered an "injury in fact"-an invasion of a legally protected interest which is (a) concrete and particularized, and (b) "actual or imminent, not `conjectural' or `hypothetical.'" Second, there must be a causal connection between the injury and the conduct complained of — the injury has to be "fairly . .. trace[able] to the challenged action of the defendant, and not . . . th[e] result [of] the independent action of some third party not before the court." Third, it must be "likely," as opposed to merely "speculative," that the injury will be "redressed by a favorable decision."
Lujan, 504 U.S. at 560-61, 112 S.Ct. at 2136 (internal citations omitted).
Similarly, Kentucky Courts have held:
In order to have standing in a lawsuit "a party must have a judicially recognizable interest in the subject matter of the suit." Healthamerica Corp. v. Humana Health Plan, Ky., 697 S.W.2d 946 (1985). The interest of a plaintiff must be a present or substantial interest as distinguished from a mere expectancy. Winn v. First Bank of Irvington, Ky.App., 581 S.W.2d 21 (1979). The issue of standing must be decided on the facts of each case. Rose v. Council for Better Education, Inc., Ky., 790 S.W.2d 186 (1989); City of Louisville v. Stock Yards Bank & Trust, Ky., 843 S.W.2d 327 (1992). Simply because a plaintiff may be a citizen and a taxpayer is not in and of itself sufficient basis to assert standing. There must be a showing of a direct interest resulting from the ordinance. Cf. Carrico v. City of Owensboro, Ky., 511 S.W.2d 677 (1974); York v. Chesapeake & Ohio Railroad Co., 240 Ky. 114, 41 S.W.2d 668 (1931).
City of Ashland v. Ashland F.O.P. No. 3, Inc., 888 S.W.2d 667, 668 (Ky. 1994).
OFI contends that the fact that Home Federal is a competitor of the regulated credit unions is not sufficient to establish standing. Under the specific facts of this case, we disagree. As OFI correctly points out, fear of competition is not injury which would afford Home Federal standing to bring this action. Healthamerica, 697 S.W.2d at 948. However, Healthamerica dealt with competition in the context of public contracts, holding that "a disappointed competitor has no standing to judicially contest the award of a public contract to another entity." Healthamerica, 607 S.W.2d at 947. Similarly, in Lexington Retail Beverage Dealers Association v. Department of Alcoholic Beverage Control Board, 303 S.W.2d 268 (Ky. 1957), the plaintiffs, who held liquor licenses, attempted to challenge an agency's increase in the quota for liquor licenses in Fayette County. The former Court of Appeals held that the licensees had no contract or property rights, and thus could not show any injury to their private rights. Id. at 270. Id.
In contrast, this case involves OFI's administration of its regulatory authority. See Humana of Kentucky, Inc. v. NKC Hospitals, Inc., 751 S.W.2d 369, 372 (Ky. 1988). Where the proposed competition is unlawful by reason of arbitrary and capricious administrative action or...
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