INDEPENDENT BANKERS v. NAT. CREDIT UNION

• Decision Date: 15 August 1996
• Docket Number: No. 96-C-0186-C.,96-C-0186-C.
• Citation: 936 F. Supp. 605
• Parties: INDEPENDENT BANKERS ASSOCIATION OF AMERICA, Community Bankers of Wisconsin, Community First Bank of Rosholt, State Bank of Cross Plains, Citizen State Bank of Loyal, Plaintiffs, v. NATIONAL CREDIT UNION ADMINISTRATION; Farm Credit Administration; Farm Credit Bank, Seventh District; Commissioner of Credit Unions, State of Wisconsin; Credit Union Review Board, State of Wisconsin; Countryside Credit Union; Farm Credit Services of Northeast Wisconsin; Farm Credit Services of East Central Wisconsin; Farm Credit Services of Southeast Wisconsin; Farm Credit Services of North Central Wisconsin, ACA; Farm Credit Services of Madison, ACA; Farm Credit Services of Northwest Wisconsin; Farm Credit Services of Western Wisconsin, ACA; Karl F. Kappleman; Vicki Coughlin; Susan Gunn; Kenneth Sipple; Thomas O'Connell; Gordon Paulson; Wayne Slotten; and Robert Esch, Defendants.
• Court: U.S. District Court — Western District of Wisconsin

936 F. Supp. 605

INDEPENDENT BANKERS ASSOCIATION OF AMERICA, Community Bankers of Wisconsin, Community First Bank of Rosholt, State Bank of Cross Plains, Citizen State Bank of Loyal, Plaintiffs, v. NATIONAL CREDIT UNION ADMINISTRATION; Farm Credit Administration; Farm Credit Bank, Seventh District; Commissioner of Credit Unions, State of Wisconsin; Credit Union Review Board, State of Wisconsin; Countryside Credit Union; Farm Credit Services of Northeast Wisconsin; Farm Credit Services of East Central Wisconsin; Farm Credit Services of Southeast Wisconsin; Farm Credit Services of North Central Wisconsin, ACA; Farm Credit Services of Madison, ACA; Farm Credit Services of Northwest Wisconsin; Farm Credit Services of Western Wisconsin, ACA; Karl F. Kappleman; Vicki Coughlin; Susan Gunn; Kenneth Sipple; Thomas O'Connell; Gordon Paulson; Wayne Slotten; and Robert Esch, Defendants.

No. 96-C-0186-C.

United States District Court, W.D. Wisconsin.

August 15, 1996.

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Leonard J. Rubin, Bracewell & Patterson, L.L.P., Washington, DC, for Independent Bankers Assc. of Am.

Kim Grimmer, Solheim, Billing & Grimmer, Madison, WI, for Community Bankers of Wisconsin, Community First Bank of Rosholt, State Bank of Cross Plains, Citizen State Bank of Loyal.

Eric D. Goulian, Civil Division, U.S. Department of Justice, Washington, DC, for National Credit Union Admin., Farm Credit Administration

Marko J. Mrkonich, Oppenheimer Wolff & Donnelly, Minneapolis, MN for Farm Credit Bank, Seventh Dist., Farm Credit Services of N.E. WI, Farm Credit Services of E. Cent. WI, Farm Credit Services of S.E. WI, Farm Credit Services of N.C. WI, Farm Credit Services of Madison, Farm Credit Services of N.W. WI, Farm Credit Services of West WI, ACA.

Laura Sutherland, Asst. Atty. General, Madison, WI, for Commissioner of Credit Unions, Credit Union Review Board.

Jonathan Aked, Madison, WI, for Countryside Credit Union, Karl F. Kappleman, Vicki Coughlin, Susan Gunn, Kenneth Sipple, Thomas O'Connell, Gordon Paulson, Wayne Slotten, Robert Esch.

OPINION AND ORDER

CRABB, District Judge.

In this civil action a group of Wisconsin banks and two trade associations with members who conduct business in Wisconsin challenge the organizational set-up of defendant Countryside Credit Union, a business that intends to operate in the same region of Wisconsin as plaintiffs. Plaintiffs argue that Countryside Credit Union's organization violates both state and federal law and will be a source of unfair competition if it is allowed to open and carry on business. They contend that Countryside Credit Union was organized in violation of Wis.Stat. §§ 186.02(1) and 186.02(2)(b), that defendant Wisconsin Commissioner of Credit Unions violated these statutes when he approved Countryside Credit Union's charter and that defendant Wisconsin Credit Union Review Board violated these statutes when it failed to intervene to prevent the Wisconsin Commissioner from approving the charter. Also, plaintiffs contend that all defendants interfered tortiously with contract in violation of Wisconsin state law.

In addition, plaintiffs contend that defendant Farm Credit Administration, a federal agency, violated the Farm Credit Act, 12 U.S.C. §§ 2001-2279bb-6, when it failed to prevent the organization of Countryside Credit Union and that defendants Farm Credit Bank, Seventh District (generally referred to as AgriBank) and the Farm Credit Associations, all of which are lending institutions regulated under the Farm Credit Act, and the individual applicants all violated the Farm Credit Act by participating in the organization of Countryside Credit Union.¹ Plaintiffs contend that the National Credit Union Administration, a federal agency, violated the Federal Credit Union Act, 12 U.S.C. §§ 1751-1795k, when it approved Countryside Credit Union's application for share insurance. Plaintiffs seek review of the actions of the Farm Credit Administration, National Credit Union Administration, AgriBank and the Farm Credit Associations under the Administrative Procedure Act, 5 U.S.C. §§ 701-706.

The case is before the court on defendants' motion to dismiss for failure to state a claim. Because plaintiffs have failed to state any federal claim upon which relief could be granted, I will grant defendants' motion to dismiss. I decline to exercise supplemental jurisdiction over plaintiffs' remaining state law claims and will dismiss those claims as well.

For the sole purpose of deciding this motion, I find that the well-pleaded allegations of plaintiffs' complaint fairly allege the following facts. (The parties have submitted a number of affidavits, all of which I have ignored. On a motion to dismiss brought pursuant to Fed.R.Civ.P. 12(b)(6), only the allegations of the complaint are to be considered.)

Allegations of Fact

On July 12, 1995, the individual applicants applied to the Wisconsin Commissioner of Credit Unions for a state credit union charter for Countryside Credit Union. At the same time the individual applicants applied to the National Credit Union Administration for federal share account insurance coverage for Countryside Credit Union. In addition, AgriBank and the Farm Credit Associations, Farm Credit System institutions that lend money solely for agricultural purposes, provided Countryside Credit Union with a total of $400,000 in start up capital. Countryside Credit Union intended to use the existing offices and personnel of the Farm Credit System institutions in order to begin operations immediately and be able to offer share accounts, consumer loans and other financial services to its members. Because Farm Credit System institutions are exempt from state and federal income taxation and therefore are able to operate at a lower expense than banking organizations engaged in a similar business, they were able to supply personnel and facilities to Countryside Credit Union at below market costs.

On January 16, 1996, plaintiffs filed a written objection with the National Credit Union Administration challenging Countryside Credit Union's application for federal share insurance. Plaintiffs argued that the organization of Countryside Credit Union violated both Wisconsin law and the Farm Credit Act because of the extensive involvement of the Farm Credit System institutions and therefore, the credit union was ineligible for federal share insurance under the Federal Credit Union Act. On February 22, 1996, plaintiffs asked the Wisconsin Commissioner of Credit Unions and the Wisconsin Credit Union Review Board to convene a hearing to hear plaintiffs' objections to the granting of a state charter to Countryside Credit Union. The core of plaintiffs' argument was that the ties between the Farm Credit System institutions and the individual applicants were so close and intimate that it was not the individual applicants but the Farm Credit System institutions who were the real organizers and operators of Countryside Credit Union. Plaintiffs contended that, because the Farm Credit System institutions were the de facto organizers of Countryside Credit Union, Countryside Credit Union violated the provisions of Wis.Stat. §§ 186.02(1) and 186.02(2)(b) that require a credit union to be organized by seven or more individual residents of the State of Wisconsin who have a common bond. Also, plaintiffs argued that if Countryside Credit Union were granted a state charter, the Farm Credit System institutions would expand their services indirectly to include traditional banking services otherwise prohibited to them because they are limited to agricultural lending at present by the Farm Credit Act.

Plaintiffs argued also that if the Farm Credit System institutions were allowed to expand their services indirectly, plaintiffs would suffer the effects of unfair competition from the Farm Credit System institutions, the de facto organizers and managers of Countryside Credit Union. Plaintiffs pointed out that because of Countryside Credit Union's own exemption from state and federal income taxation, the financial support of the Farm Credit System institutions and the Farm Credit System institutions' access to cheaper capital than the banks and their exemption from certain regulations applicable to banks, Countryside Credit Union can offer better interest rates than the banks on loans, checking and savings share accounts, as well as lower service charges. Plaintiffs claimed that as a result they would suffer injury because many of their customers would withdraw their money from plaintiffs' banks and deposit it in Countryside Credit Union.

On February 27, 1996, without granting the plaintiffs their requested hearing, the Wisconsin Commissioner of Credit Unions issued a state charter to Countryside Credit Union. However, on March 4, 1996, the Wisconsin Credit Union Review Board intervened and blocked Countryside Credit Union from conducting business or advertising and on April 16-17, 1996 it held a hearing on plaintiffs' appeal. The board has yet to issue a final decision. Finally, although the National Credit Union Administration gave initial approval to Countryside Credit Union's share insurance application, it has deferred a decision on issuance of the certificates of share insurance pending a final decision by the Wisconsin Credit Union Review Board.

OPINION

At the outset, I note that plaintiffs have moved to amend their complaint and to strike references to certain unpublished opinions in defendants' briefs. Because plaintiffs have failed to allege any facts in their proposed amended complaint to suggest that they have an arguable basis in law for a federal claim that could withstand a motion to dismiss, amendment would be futile. Reimann v. Murphy, 897 F.Supp. 398, 401 (E.D.Wis.1995). Furthermore, I will deny plaintiffs' motion to strike references to certain unpublished opinions in defendants' briefs. This court has no rules prohibiting ...