Community First Bank v. National Credit Union Admin., 93-2244

• Decision Date: 08 May 1995
• Docket Number: No. 93-2244,93-2244
• Citation: 41 F.3d 1050
• Parties: COMMUNITY FIRST BANK; Independent Bank; The Ionia County National Bank of Ionia; Union Bank, Plaintiffs-Appellants, v. The NATIONAL CREDIT UNION ADMINISTRATION; Portland Federal Credit Union, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1050

41 F.3d 1050

63 USLW 2373

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

No. 93-2244.

United States Court of Appeals Sixth Circuit.

Argued Oct. 13, 1994.

Decided Dec. 5, 1994.

As Amended May 8, 1995.

William K. Holmes and Robert J. Jonker (argued and briefed), Warner, Norcross & Judd, Grand Rapids, MI, for plaintiffs-appellants.

Thomas J. Gezon, Asst. U.S. Atty., Office of the U.S. Atty., Grand Rapids, MI, Douglas N. Letter, Dept. of Justice, Appellate Staff, Civ. Div.; and Jonathan R. Siegel (argued and briefed), U.S. Dept. of Justice, Civ. Div., Washington, DC, for defendant-appellee.

Thomas J. Gezon, Asst. U.S. Atty., Office of the U.S. Atty., Grand Rapids, MI, Steven Widerman, Office of Gen. Counsel, Nat. Credit Union, and Kenneth L. Doroshow, U.S. Dept. of Justice, Civ. Div., Washington, DC, for defendant.

Michael F. Crotty (briefed), American Bankers Ass'n; and Teresa Burke (briefed), and Paul J. Lambert, Bingham, Dana & Gould, Washington, DC, for amici curiae.

Before: KEITH, WELLFORD, and DAUGHTREY, Circuit Judges.

WELLFORD, Circuit Judge.

Four Michigan banks, competitors of Portland Federal Credit Union ("Portland Federal") challenge the National Credit Union Administration's ("NCUA") decision to allow Portland Federal to expand its service area to all of Ionia County, Michigan. The district court granted summary judgment in favor of NCUA and Portland Federal, 832 F.Supp. 1118. The plaintiff banks filed a timely appeal with this court challenging the action of NCUA in granting the expansion and the district court's approval thereof.

On appeal, defendant the NCUA challenges the standing of the banks to contest its expansion. Assuming the banks do have standing, the second issue becomes whether the district court improperly granted summary judgment in favor of Portland Federal and NCUA.

I. PROCEDURAL BACKGROUND

Portland Federal is a tax-exempt, community-based credit union, located in Ionia County, Michigan. Although Portland has a population of only 4,000 people, the surrounding rural areas around Portland have a population of about 70,000 people. It is these rural areas that Portland Federal is attempting to reach. ¹ One of the prime targets of expansion is the City of Ionia, which is about the same size as Portland but is the county seat. Much of the litigation involves whether Ionia and Portland are one "community."

From humble beginnings in 1947 as an occupational credit union, Portland Federal has expanded to meet the needs of this relatively small rural area around Portland. In 1953, it converted to a community-based organization, serving persons within a six-mile radius of the Portland Post Office. In 1981, it amended its charter again to include certain adjacent portions of Clinton County and Eaton County and certain additional portions of Ionia County, all immediately surrounding the City of Portland. It sought, in August of 1992, to amend its charter to include the remainder of Ionia County, and about one-fourth of neighboring Clinton County.

Four nearby competitor private banks contest this requested expansion, ² arguing that the region does not constitute a "community" for purposes of establishing a required "common bond" within the meaning of the Federal Credit Union Act, 12 U.S.C. Sec. 1759. Plaintiffs stress that "[t]he proposed field of membership covered over 70,000 persons and numerous distinct communities within Ionia County, including two cities comparable to or larger than Portland, Ionia and Belding." ³ The proposed area of expanded membership also touched "three separate United States Congressional Districts, three separate state Senatorial districts, six public school districts, and two separate area codes" according to plaintiffs. The competitor banks also presented a marketing study (which had been conducted by the Ionia County Board of Commissioners to study the quality of the county's governmental services) for the proposition that little commercial intercourse existed between Portland and Ionia.

Portland Federal challenges the banks' reliance on this marketing study, arguing that the competitor banks selectively picked data from the largest cities, even though the study relied upon by the banks was a county-wide study and the disclaimer on the report stated that the study was "based on a countywide sample and the survey design never intended to produce information reliable at the level of individual cities or townships." Portland Federal submitted their own marketing study, which demonstrated, among other things,

that the city of Ionia was the county seat of Ionia county, to which many people regularly traveled on business; survey results showing that people regularly commute in the area; shared characteristics and concerns of persons in the area; and the likeness of the proposed area to a regulatory example ... of a permissible area contained in the agency's [regulations].

Portland Federal also presented demographic evidence to demonstrate that the two towns share common characteristics. They pointed to survey responses of its customers as to the advisability of expanding the credit union to demonstrate that Ionia County residents consider the entire county one community. The majority of responses reflect that many members of the credit union have commercial transactions in both towns.

If plaintiffs have standing, we have jurisdiction over this appeal from a final order of the district court pursuant to 28 U.S.C. Sec. 1291. The district court properly exercised jurisdiction pursuant to 28 U.S.C. Sec. 1331 as this action arose under the Federal Credit Union Act, 12 U.S.C. Sec. 1751, et seq.

II. STANDING OF BANKS TO CHALLENGE THE AGENCY'S DECISION

A. Standing requirements cannot be waived by individual parties.

Portland Federal did not prevail on the standing issue raised in the district court, but failed to cross-appeal the district court's judgment, approving expansion. Plaintiffs argue that Portland Federal has waived its standing challenge by failing to cross-appeal. Plaintiffs seek to rely on the Supreme Court's distinction in several cases between constitutional and prudential standing requirements. The Supreme Court has recognized that constitutional standing requirements cannot be waived, but there may be a waiver of prudential standing requirements. Plaintiffs suggest that individual parties may waive prudential standing requirements if they fail to raise standing as an issue on cross-appeal.

We disagree with plaintiffs on this contention. Standing is not an affirmative defense that must be raised at risk of forfeiture. Instead, it is a qualifying hurdle that plaintiffs must satisfy even if raised sua sponte by the court. We find no authority for the plaintiffs' argument that prudential standing requirements may be waived by the parties. Recognizing a distinction between prudential and constitutional standing requirements in this context might give careless parties power to override congressional intent.

B. Competitor banks are suitable challengers to a credit union expansion.

The real issue is whether the plaintiffs satisfy the prudential standing requirements. To meet these standing requirements under Sec. 702 of the Administrative Procedure Act (APA), 5 U.S.C. Sec. 702, plaintiffs must establish 1) that they have suffered a legal wrong because of the challenged agency action, or, are adversely effected within the meaning of a relevant statute, and 2) that the injury they complain of is within the zone of interests of the statutory provision which forms the legal basis of their complaint. Air Courier Conference of America v. American Postal Workers Union, 498 U.S. 517, 522-25, 111 S.Ct. 913, 917-18, 112 L.Ed.2d 1125 (1991). Have plaintiffs in this case met the second part of the test--the "zone of interest" test?

The "zone of interest" test excludes those plaintiffs whose "interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress intended to permit the suit." Clarke v. Securities Indus. Ass'n, 479 U.S. 388, 399-400, 107 S.Ct. 750, 757, 93 L.Ed.2d 757 (1987). "The test is not meant to be especially demanding; in particular, there need be no indication of congressional purpose to benefit the would-be plaintiff." Id. (citations and footnote omitted).

The two courts that have addressed whether banks have standing to challenge charter expansions of credit unions under the Federal Credit Union Act have reached contrary results. See First National Bank & Trust Co. v. National Credit Union Admin., 988 F.2d 1272 (D.C.Cir.), cert. denied, --- U.S. ----, 114 S.Ct. 288, 126 L.Ed.2d 238 (1993) (holding banks do have standing); Branch Bank & Trust v. National Credit Union Admin., 786 F.2d 621 (4th Cir.1986), cert. denied, 479 U.S. 1063, 107 S.Ct. 948, 93 L.Ed.2d 997 (1987) (holding banks do not have standing). We enter the debate now and grant standing to the competitor banks.

It should be noted that in both First National and Branch Bank, the courts concluded that banks do not meet the "zone of interest test" because the legislative history demonstrates that Congress intended to promote the growth of credit unions, not insulate banks from competition. See First National, 988 F.2d at 1275; Branch Bank, 786 F.2d at 625-27. During the interim between these cases, however, the Supreme Court reemphasized that even if a plaintiff were not the intended beneficiary of the legislation, it would nevertheless have standing to sue if the interest it asserted had a plausible relationship to the policies underlying the legislation. Clarke, 479 U.S. at 403, 107 S.Ct. at 759. The later First National opinion, relying on Clarke, held that banks were suitable challengers to credit union expansion...