Community First Bank v. NATIONAL CREDIT UNION ADM.

• Decision Date: 25 August 1993
• Docket Number: No. 5:93-cv-59.,5:93-cv-59.
• Citation: 832 F. Supp. 1118
• Parties: COMMUNITY FIRST BANK, Independent Bank, The Ionia County National Bank of Ionia and Union Bank, Plaintiffs, v. The NATIONAL CREDIT UNION ADMINISTRATION and Portland Federal Credit Union, Defendants.
• Court: U.S. District Court — Western District of Michigan

832 F. Supp. 1118

COMMUNITY FIRST BANK, Independent Bank, The Ionia County National Bank of Ionia and Union Bank, Plaintiffs, v. The NATIONAL CREDIT UNION ADMINISTRATION and Portland Federal Credit Union, Defendants.

No. 5:93-cv-59.

United States District Court, W.D. Michigan, S.D.

August 25, 1993.

Robert J. Jonker and Dennis John Donohue, Warner, Norcross & Judd, Grand Rapids, MI, for plaintiffs, Community First Bank, Independent Bank, The Ionia County Nat. Bank of Ionia and Union Bank.

John A. Smietanka, U.S. Atty., Thomas J. Gezon, Acting U.S. Atty., Michael L. Schipper, Asst. U.S. Atty., Grand Rapids, MI; Steven W. Widerman, Nat. Credit Union Admin., Office of Gen. Counsel; Kenneth L. Doroshow, Anne L. Wiesmann, U.S. Dept. of Justice, Civ. Div., Washington, DC; and Nicholas Veghts, Nat. Credit Union Ass'n, Region IV, Lisle, IL, for defendant, Nat. Credit Union Admin.

Grant J. Gruel, Gruel, Mills, Nims & Pylman, Grand Rapids, MI, for defendant, Portland Federal Credit Union.

John J. Gill and Michael F. Crotty, American Bankers Ass'n, Washington, DC, for amicus, American Bankers Ass'n Donald C. Heikkinen, Michigan Bankers Ass'n, Lansing, MI, for amicus, Michigan Bankers Ass'n.

Paul J. Lambert, Teresa Burke, and Carolyn M. Landever, Bingham, Dana & Gould, Washington, DC, for amicus, Credit Union Nat. Ass'n and for amicus, Michigan Credit Union League.

Steven L. Owen, Michael W. Puerner, and Mark J. Burzych, Foster, Swift, Collins & Smith, P.C., Lansing, MI, for amicus, Michigan League of Sav. Institutions.

OPINION AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT

MILES, Senior District Judge.

In this action filed under the Administrative Procedure Act, 5 U.S.C. § 701 et seq., the plaintiffs, four banks, challenge a decision of the National Credit Union Administration ("NCUA") approving an application by a federal credit union for amendment of its membership charter.

The matter came before the court on August 17, 1993 for a hearing on motions for summary judgment filed by both the plaintiffs and the defendant. For the reasons which follow, the court hereby DENIES the plaintiffs' motion for summary judgment, and GRANTS the defendant's motion for summary judgment.

FACTS

Portland Federal Credit Union ("Portland Federal") is a federal credit union based in the City of Portland, Ionia County, Michigan. As a federally-chartered credit union, Portland Federal is subject to the requirements of the Federal Credit Union Act ("FCUA"), 12 U.S.C. § 1751 et seq. NCUA is an independent federal agency based in Washington, D.C., and is the governmental body responsible for the regulation of federal credit unions. Among NCUA's duties is the approval of federal credit union charters, including but not limited to the approval of the credit union's proposed field of membership. 12 U.S.C. §§ 1753, 1754.

The plaintiffs in this action are four banks. Plaintiff Community First Bank a federal savings bank based in the City of Lansing, Ingham County, Michigan. Plaintiff Independent Bank is a Michigan banking corporation based in the City of Ionia, Ionia County, Michigan. Plaintiff The Ionia County National Bank of Ionia is a national bank based in the City of Ionia, Ionia County, Michigan. Finally, plaintiff Union Bank is a state-chartered Michigan banking corporation based in the City of Lake Odessa, Ionia County, Michigan. All four plaintiffs allege that they provide financial services to persons in Ionia County, Michigan.

Portland Federal was initially formed in 1947 as an occupational credit union for the employees of the Portland Manufacturing Company in Portland, Michigan. In 1953, Portland Federal amended its charter, converting to a community-based credit union serving persons residing within a six-mile radius of the Portland post office. In 1981, the credit union again amended its charter and expanded its field of membership to include small segments of Clinton County and Eaton County, Michigan as well as a segment of Ionia County, Michigan surrounding Portland.

On August 19, 1992, Portland Federal again applied to NCUA for permission to amend its charter to expand its field of membership to include the remainder of Ionia County and parts of three townships in Clinton County. Responding to objections received from other credit unions operating within the proposed area, Portland Federal later amended its application to reduce the population in the proposed area of expansion by exempting certain persons from membership who were already eligible for membership in other credit unions, by limiting the proposed expansion to within Ionia County only, and by further limiting the proposed expansion to exclude Otisco Township within Ionia County. The Regional Director of NCUA's Region IV office approved Portland Federal's expanded charter, as modified, on March 1, 1993.

The plaintiff banks, who had expressed to NCUA certain objections to Portland Federal's proposed expansion within Ionia County,¹ filed their complaint in this action on May 14, 1993, alleging that the Regional Director's decision approving the expansion does not satisfy certain statutory and regulatory criteria imposing limits on membership in community-based credit unions.² They seek a ruling invalidating both the Regional Director's decision and Portland Federal's amended charter.

ANALYSIS

Both the plaintiffs and NCUA have moved for summary judgment. In their motion, the plaintiffs basically argue that NCUA's approval of Portland Federal's amended charter must be invalidated because (1) the Regional Director did not adequately explain the basis for his decision approving the expansion, and (2) the only evidence before the agency demonstrated that Portland Federal's expanded field of membership did not satisfy the community common bond requirement. In its motion, NCUA argues that its decision that Ionia County represents a community for field of membership purposes is amply supported by the record and must be upheld.

This is an action seeking review of an administrative decision. Agency decisions may be set aside only if they are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A); Communities, Inc. v. Busey, 956 F.2d 619, 623 (6th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 408, 121 L.Ed.2d 332 (1992). "While a court reviewing agency determinations should not be a rubber stamp, the arbitrary and capricious standard is deferential toward agency decisions." Goldin v. FDIC, 985 F.2d 261, 263 (6th Cir.1993) (citing Air Pollution Control District v. Environmental Protection Agency, 739 F.2d 1071, 1083 (6th Cir.1984)). This court must uphold the agency's action if there is a rational basis for the action. Air Pollution Control District, 739 F.2d at 1083. In determining whether the decision made survives review under the arbitrary and capricious standard, the court

must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. Citations omitted. Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. The court is not empowered to substitute is judgment for that of the agency.

Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823-24, 28 L.Ed.2d 136 (1971). In applying the standard, "the focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court." Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 1244, 36 L.Ed.2d 106 (1973). "If the record before the agency does not support the agency action, if the agency has not considered all relevant factors, or if the reviewing court simply cannot evaluate the challenged agency action on the basis of the record before it, the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation. The reviewing court is not generally empowered to conduct a de novo inquiry into the matter being reviewed and to reach its own conclusions based on such an inquiry." Florida Power v. Lorion, 470 U.S. 729, 744, 105 S.Ct. 1598, 1607, 84 L.Ed.2d 643 (1985).

Because both parties have moved for summary judgment, and because the court's task is limited to reviewing the Regional Director's decision based on the evidence which was before the agency at the time of the decision, there can be little doubt that this case is not in need of factual development which would prevent the entry of summary judgment. Accordingly, the court will proceed directly to the merits.

The Federal Credit Union Act limits membership in federal credit unions

to groups having a common bond of occupation or association, or to groups within a well-defined neighborhood, community, or rural district.

12 U.S.C. § 1759. The Act provides no further definition of these limits, thus leaving their interpretation to NCUA.

NCUA's interpretation of the common bond limits contained in 12 U.S.C. § 1759 is set forth in agency's "Interpretative Ruling and Policy Statement 89-1: Chartering and Field of Membership Policy" ("IRPS 89-1"), 54 Fed.Reg. 31168 (July 27, 1989).³ NCUA's chartering policies as expressed in IRPS 89-1 are directed toward achieving three goals:

A. To uphold the provisions of the Federal Credit Union Act concerning granting Federal charters;

B. To promote credit union safety and soundness; and

C. To make quality credit union service available to all eligible groups who wish to have it.

Id., 54 Fed.Reg. at 31168.⁴ Consistent with these goals, NCUA has further stated that it may grant a federal credit union charter to any group where it finds:

— The group possesses a recognizable and appropriate common bond;

— The subscribers are of good character and are fit to represent the group; and

— Establishment of the credit union is economically advisable — i.e., it will be a viable institution and its

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