Hurry v. Fed. Deposit Ins. Corp.

• Docket Number: Civil Action No. 18-2435 (RDM)
• Decision Date: 24 February 2022
• Citation: 589 F.Supp.3d 100
• Parties: Justine HURRY, Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION, et al., Defendants.
• Court: U.S. District Court — District of Columbia

589 F.Supp.3d 100

Justine HURRY, Plaintiff,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, et al., Defendants.

Civil Action No. 18-2435 (RDM)

United States District Court, District of Columbia.

Signed February 24, 2022
Filed March 7, 2022

589 F.Supp.3d 104

Joseph Andrew Smith, Thompson Hine LLP, Washington, DC, Brian Lanciault, Pro Hac Vice, Maranda E. Fritz, Pro Hac Vice, Thompson Hine LLP, New York, NY, for Plaintiff.

Erik Bond, Federal Deposit Insurance Corporation, Arlington, VA, for Defendants.

MEMORANDUM OPINION

RANDOLPH D. MOSS, United States District Judge

The Change in Bank Control Act of 1978 ("CBCA") prohibits a person from acquiring a controlling interest in a bank unless the "appropriate Federal banking agency has been given sixty days’ prior written notice of [the] proposed acquisition and within that time period the agency has not issued a notice disapproving the proposed acquisition." 12 U.S.C. § 1817(j)(1). The agency may extend that period for up to 120 days if certain conditions are met, and it may disapprove the proposed acquisition if, among other things, the "acquiring person neglects, fails, or refuses to furnish the [agency] all the information [the agency] require[s]." Id. § 1817(j)(7)(E). If the agency disapproves the proposed transaction, "the acquiring party may request an agency hearing on the proposed transaction," and, at the completion of the hearing, the agency must issue an order either approving or disapproving the proposed acquisition. Id. § 1817(j)(4). If the acquisition is again disapproved after the hearing, the acquiring party may then seek review in the D.C. Circuit or in "the circuit in which the home office of the bank to be acquired is located." Id. § 1817(j)(5). This case poses the question whether a federal banking agency may circumvent this process by declining to accept a notice of proposed acquisition in the first place on the ground that it is not "substantially complete." If so, the 60-day clock (or, if extended, the 180-day clock) never starts, and neither an administrative hearing nor direct review in a court of appeals is available. The answer to that question turns on the particular circumstances presented.

Here, Plaintiff Justine Hurry provided the relevant federal banking agency—Defendant Federal Deposit Insurance Corporation ("FDIC")—with written notice of her proposed acquisition of the Bank of Orrick. A few weeks later, the FDIC concluded that the notice was incomplete and, accordingly, returned it to Hurry. In response, Hurry resubmitted her notice, along with additional information and documentation. But the FDIC was still unsatisfied, and it once again returned the notice as incomplete. After the FDIC and Hurry's counsel conferred about the missing information, Hurry submitted her written notice for a third time. That third effort helped but not enough, and the FDIC warned Hurry that, if she did not promptly provide it with additional information relating to (1) the source of funds necessary to complete the transaction and (2) Hurry's associations and affiliations (along with relevant trust documentation), the agency would conclude that she did "not want to furnish the requested information." Dkt. 29-1 at 295. In response, Hurry submitted some additional material, but she also took issue with the FDIC's request for information regarding two irrevocable trusts, arguing that the information was both unnecessary and invasive of

589 F.Supp.3d 105

third-party privacy interests. The FDIC, for its part, concluded that Hurry's submission was "improved" but that it was still inadequate.

After yet another submission of additional material, the FDIC appeared satisfied that Hurry had addressed the source of funds, but it disagreed with her counsel regarding the need for information relating to the irrevocable trusts. Once again, the agency "return[ed] the filing as incomplete because [Hurry] ha[d] not submitted ... the needed information." Id. at 293. Concluding that the dispute had run its course, Hurry requested that the agency "make a final decision on the notice of change of control ... based on the information previously provided." Id. at 373. After internal deliberations, the FDIC sent Hurry its final determination, which forms the basis of Hurry's challenge in this case. That letter explained that the FDIC had previously returned Hurry's notice as incomplete and that, despite the extensive back-and-forth, Hurry had failed to provide the agency "with all the information needed to complete a review of her competence, experience, integrity, and financial ability pursuant to 12 U.S.C. § 1817(j)." Id. at 393. But rather than accept Hurry's invitation to render a final decision on the merits of her notice, the FDIC decided to close Hurry's file on grounds of abandonment, thereby ending the administrative process—if, in fact, it ever began.

Hurry then brought this challenge, and, after an initial false start, she amended her complaint to assert three claims under the Administrative Procedure Act ("APA"), 5 U.S.C. § 701 et seq. Count I seeks to compel the FDIC to take administrative action (either approving or disapproving her notice) unlawfully withheld. Count II challenges the FDIC's decision to close her file on grounds of abandonment as arbitrary and capricious and contrary to law. Count III alleges that the FDIC arbitrarily sought information regarding the finances of Hurry's husband, demonstrating an "impermissible bias" based on Hurry's sex and the assumption that her husband would exert control over the bank.

As explained below, the Court concludes that Count I is based on the premise that the FDIC was required to act on Hurry's written notice of proposed acquisition. That premise is incorrect because the CBCA does not require the federal banking agency to act; instead, it permits the agency to disapprove a proposed acquisition within the prescribed time period but, if the agency does not act, the acquisition may proceed. The problem here is not that the FDIC failed to act on the notice; the problem is that it refused to accept the notice in the first place. That separate problem is addressed in Count II of the Amended Complaint, which alleges that the FDIC erred in refusing to accept the notice and then closing Hurry's file as abandoned. The Court agrees with Hurry that the FDIC erred in this limited respect and concludes that the agency should have accepted the notice, and, then, if dissatisfied with the information that Hurry provided, it could have disapproved the acquisition. Had the FDIC done so, Hurry would have had the right to a hearing and, if unsuccessful, to seek review of the agency's decision on the merits in an appropriate court of appeals. By declining even to accept the notice, however, the FDIC cut short Hurry's procedural rights and deprived her of her statutory right to an administrative hearing and to direct appellate review. Finally, Hurry says almost nothing about Count III in her motion or opposition, and the Court has no reason, based on the existing record and briefing, to conclude that the FDIC unlawfully focused on Hurry's husband.

589 F.Supp.3d 106

The Court will, accordingly, GRANT Hurry's motion for summary judgment in part, Dkt. 23, as to Count II; will DENY her motion as to Count I; will DENY the FDIC's cross-motion for summary judgment, Dkt. 24, as to Count II; will GRANT the FDIC's motion as to Count I; and will DISMISS Count III as premature.

I. BACKGROUND

A. Statutory and Regulatory Background

Under the Change in Bank Control Act of 1978, Pub. L. No. 95-630, 92 Stat. 3641, 3683–87 (codified as amended at 12 U.S.C. § 1817(j) ), a person may not "acquire control of any insured depository institution" unless "the appropriate Federal banking agency has been given sixty days’ prior written notice of [the] proposed acquisition," and, "within that time period the agency has not issued a notice disapproving the proposed acquisition," 12 U.S.C. § 1817(j)(1). The 60-day period, however, is not cast in stone. To start, the agency may, in its discretion, extend the disapproval period for "an additional 30 days." Id. Beyond that, the "period for disapproval ... may be extended" up to two additional times "for not more than 45 days each," but only if:

(A) the agency determines that any acquiring party has not furnished all the information required under paragraph (6);

(B) in the agency's judgment, any material information submitted is substantially inaccurate;

(C) the agency has been unable to complete the investigation of an acquiring party under paragraph (2)(B) because of any delay caused by, or the inadequate cooperation of, such acquiring party; or

(D) the agency determines that additional time is needed—

(i) to investigate and determine that no acquiring party has a record of failing to comply with the requirements of subchapter II of chapter 53 of Title 31; or

(ii) to analyze the safety and soundness of any plans or proposals described in paragraph (6)(E) or the future prospects of the institution.

Id. § 1817(j)(1)(A)–(D). Thus, if the banking agency exercises its authority to extend the period of review to the maximum extent permitted by the CBCA, the agency has up to 180 days to disapprove an acquisition. "An acquisition may be made prior to expiration of the disapproval period," however, "if the agency issues written notice of its intent not to disapprove the action." Id. § 1817(j)(1). Alternatively, if the relevant time period runs without FDIC action on the written notice of proposed acquisition, the acquiring party is free to proceed.

Section 1817(j)(6) —or "Paragraph 6"—of the CBCA provides that, "[e]xcept as otherwise provided by regulation of the appropriate Federal banking agency, a notice filed pursuant to [the CBCA] shall contain," inter alia , the following information:

(A) The identity, personal history, business background and experience of each person by whom or on whose behalf the acquisition is to be made, including his material

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