First Nat. Bank v. National Credit Union Admin., Civ. A. No. 90-2948.

• Decision Date: 15 September 1994
• Docket Number: Civ. A. No. 90-2948.
• Citation: 863 F. Supp. 9
• Parties: FIRST NATIONAL BANK, et al., Plaintiffs, v. NATIONAL CREDIT UNION ADMINISTRATION et al., Defendants.
• Court: U.S. District Court — District of Columbia

863 F. Supp. 9

FIRST NATIONAL BANK, et al., Plaintiffs, v. NATIONAL CREDIT UNION ADMINISTRATION et al., Defendants.

Civ. A. No. 90-2948.

United States District Court, District of Columbia.

September 15, 1994.

A. Douglas Melamed, Wilmer, Cutler & Pickering, Washington, DC, for plaintiffs.

Paul J. Lambert, Bingham, Dana & Gould, Washington, DC, for defendants-intervenors.

Kenneth L. Doroshow, U.S. Dept. of Justice, Washington, DC, for defendants.

MEMORANDUM OPINION

JOHN H. PRATT, District Judge.

On September 9, 1994, this Court conducted a hearing to consider whether the National Credit Union Administration's ("NCUA") interpretation of the "common bond provision" in the Federal Credit Union Act ("FCUA")¹ conflicts with the clear intent of Congress or whether the Court must defer to the NCUA's interpretation. The issue has been well-briefed on both sides. Based on the arguments and authorities presented by the parties in their briefs and during the hearing, we defer to the NCUA's interpretation of the common bond provision. Plaintiffs' renewed motion for summary judgment is denied and defendants' summary judgment motions are granted.²

I. Background

In 1991, the Court determined that plaintiffs did not have standing to challenge the agency decision because they were not the intended beneficiaries of the FCUA and because Congress did not intend to protect competitive interests. 772 F.Supp. 609 (D.D.C.1991) (Harris, J.). The Court of Appeals reversed, 988 F.2d 1272 (D.C.Cir.1993), cert. denied, ___ U.S. ___, 114 S.Ct. 288, 126 L.Ed.2d 238 (1993), and the matter now comes before the undersigned judge for consideration on the merits.

Plaintiffs, four North Carolina banks and the American Bankers Association, challenge the NCUA's approval of several applications by AT & T Family Federal Credit Union ("AT & T Family") to expand its membership to include the employees of unrelated employers in several areas of the United States. Plaintiffs, which are conventional banks and their trade association, contend that they are suffering from the competition caused by the expansion of AT & T Family. At the September 9th hearing, the Court concluded that it was impossible to consider the validity of the application approvals by the NCUA without examining its interpretation of the common bond provision. The remainder of this opinion will focus on the common bond provision and whether the NCUA's interpretation conflicts with Congress' intent.

Congress first authorized federal credit unions during the Great Depression. It will be recalled that in March 1933, President Roosevelt found it necessary to close all banks and that the woeful state of the nation's banking system during the early 1930s left large segments of the population without access to necessary credit. Congress reviewed the then existing system of state licensed credit unions and determined that federal credit unions would improve access to credit for people of "small means." S.Rep. No. 55, 73d Cong., 2d Sess. 1 (1934). The basic statute was passed at that time.

By definition, a federal credit union is owned by its members and can issue loans only to its members or to other credit unions. 12 U.S.C. § 1757. To insure sound loan policies in an era before deposit insurance,³ Congress restricted membership to "groups having a common bond of occupation or association." Id. § 1759. The original purpose behind the common bond provision was twofold: to insure the financial stability of credit unions by providing a sense of cohesiveness among members and by enabling the members to establish a borrower's credit worthiness at minimum cost; and to promote the growth of credit unions because it was faster and easier to form a credit union with members who already had a common bond.

Until 1982, the NCUA and its regulatory predecessors interpreted the common bond provision as requiring that the members of each credit union have a single common bond with each other, although beginning in the 1960s, the NCUA began expanding the criteria for determining common bond in response to changing economic conditions. For example, in 1968, the NCUA permitted a "once a member always a member" inclusion under common bond. General Accounting Office, Credit Unions: Reforms for Ensuring Future Soundness 217 (1991) (hereafter "GAO Report"). The NCUA has followed a broader interpretation of "common bond" since 1982 which allows multiple unrelated groups to join the same credit union if each group has a common bond among its members.

The expansion of AT & T Family is premised on this interpretation which plaintiffs now challenge.⁴ Plaintiffs seek injunctive and declaratory relief vacating all AT & T Family membership approvals since November 14, 1989.⁵ Relief is sought on the theory that the NCUA's approval of the membership expansions violates the Administrative Procedure Act ("APA").⁶ 5 U.S.C. § 706.

II. Analysis

There are no material questions of fact precluding summary judgment in this case. The Court's review of an agency's interpretation of a statute must follow "the well-trodden path carved out in Chevron U.S.A., Inc. v. National Resources Defense Council, Inc., 467 U.S. 837 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)." Northwest Airlines, Inc. v. U.S. Dept. of Transportation, 15 F.3d 1112, 1118 (D.C.Cir.1994). The first prong of the Chevron formulation, often called "Chevron I," asks whether the Court,

armed with the traditional tools of statutory construction, ... can ascertain clear congressional intent on the precise issue before us.

Id. (emphasis added). If the statutory language is silent or ambiguous on this specific issue, the Court then proceeds to the second prong of the Chevron formulation, "Chevron II." Doe v. Sullivan, 938 F.2d 1370, 1381 (D.C.Cir.1991). Under Chevron II, the Court must determine whether the agency's interpretation of the statute is a reasonable one. We are required to defer to the agency's construction of the statute as long as it is reasonable or permissible. Id.

A. Chevron I: Congressional Intent

1. The Language of the Statute

The Court looks first to the language of the statute itself in establishing whether Congress intended to limit credit union membership to individuals having a single common bond.⁷ Nichols v. Asbestos Workers Local 24 Pension Plan, 835 F.2d 881, 892 n. 86 (D.C.Cir.1987) ("the best guide to what a statute means is what it says") (emphasis in original). Plaintiffs argue that the common bond provision should be read in the singular, i.e., that each credit union shall have a single common bond. Defendants counter that the reference to "groups" proves that Congress contemplated multiple groups within a single credit union.

The Court concludes that either interpretation is plausible. The first portion of the statute appears to use "federal credit union membership" in the singular as it requires each member to "subscribe to at least one share of its the credit union's stock." It is plausible that the second reference to "Federal credit union membership", in the common bond phrase, is also meant in the singular, but then contemplates several "groups" within that one credit union. A "court must look to the particular statutory language at issue, as well as the language and design of the statute as a whole." McCarthy v. Bronson, 500 U.S. 136, 139, 111 S.Ct. 1737, 1740, 114 L.Ed.2d 194 (1991). Therefore, a reasonable reading of the common bond provision is that a credit union may have several groups, each with its own common bond.⁸

Plaintiffs counter that such a reading of the statute would permit limitless growth by federal credit unions and frustrate the limitations evident in the statutory language. We disagree. "Whereas almost all private business will serve any customer, the `customers' of each federal credit union ... are expressly `limited to groups having a common bond.'" United States v. Michigan, 851 F.2d 803, 807 (6th Cir.1988). Each group must "be employed by the same enterprise" or belong to the same association that has "common loyalties" and holds yearly meetings.⁹ 54 Fed. Reg. 31169.

When an agency's interpretation is one of two plausible alternatives, the statute is ambiguous. International Union, UMW v. Federal Mine Safety and Health Admin., 920 F.2d 960, 963 (D.C.Cir.1990) (statute is ambiguous if it does "not clearly preclude" the agency's approach). Next we look to the legislative history for a possible resolution of this ambiguity.

2. Legislative History of the Common Bond Provision

The legislative history concerning the common bond provision is predictably murky and is a slender reed upon which to place reliance. "Congress did not ... elaborate on the definition of the common-bond provision at the time the FCUA was debated or express the reason for the requirement." GAO Report at 217.¹⁰ Both sides point to isolated portions of the record; particularly to the differing language in the Senate and House of Representatives committee reports of 60 years ago.

Plaintiffs rely on a statement from a 1934 Senate Report in which the Committee describes credit unions as, inter alia, "limited in each case to the members of a specific group with a common bond of occupation or association." S.Rep. No. 555, 73d Cong., 2d Sess. (1934). In context, however, this statement may well be little more than a description of the field of state credit unions as they existed in 1934. It appears to be a descriptive rather than exhaustive statement and not meant to define the limits of credit union organization. NCUA Report at 14.¹¹

Defendants seize upon the House Report which indicates that "membership in Federal credit unions is limited to groups having common bonds of occupation or association or to groups within well-defined communities." H.R.Rep. No. 2021, 73d Cong., 2d Sess. 3 (1934). We are equally unwilling to overemphasize the importance of this statement. The legislative record, taken as a whole, does not provide the clear...