Kolb v. Naylor, C 85-4184.

• Decision Date: 27 March 1987
• Docket Number: No. C 85-4184.,C 85-4184.
• Citation: 658 F. Supp. 520
• Parties: Jim D. KOLB, et al., Plaintiffs, v. Frank W. NAYLOR, Governor, Farm Credit Administration, et al., Defendants.
• Court: U.S. District Court — Northern District of Iowa

658 F. Supp. 520

Jim D. KOLB, et al., Plaintiffs, v. Frank W. NAYLOR, Governor, Farm Credit Administration, et al., Defendants.

No. C 85-4184.

United States District Court, N.D. Iowa, W.D.

March 27, 1987.

Timothy Shuminsky, Sioux City, Iowa, Roger Elletson, Cheyenne, Wyo., for plaintiffs.

Sandra Schraibaum, Julianna D'Angelo, Dept. of Justice, Washington, D.C., James Fitzgerald, Omaha, Neb., William Edmonds, Sioux City, Iowa, Frank Hutfless, Omaha, Neb., Paul Lillios, Asst. U.S. Atty., Cedar Rapids, Iowa, for defendants.

ORDER

DONALD E. O'BRIEN, Chief Judge.

This matter is before the Court on the federal and nonfederal defendants' motions to dismiss. A hearing was held on February 9, 1987. After careful consideration of the parties' briefs and arguments and plaintiffs' exhibits, the Court grants both motions.

FACTS

Plaintiffs are five Iowa citizens who are attempting to bring a class action¹ against various defendants, including the Federal Reserve Board, certain agricultural lenders, and the Farm Credit Administration. Plaintiffs' farms have been foreclosed, and the substance of their complaint is that defendants have violated a wide variety of state or federal statutes and have implemented policies against the interests of American agriculture and the family farm.

The defendants fall into two categories. The federal defendants consist of Paul Volcker, chairman of the Federal Reserve Board; the Board of Governors of the Federal Reserve System; the Federal Reserve Bank of Chicago, including Silas Keehn, president; John W. Gabbert, Barry E. Sullivan and O.J. Thomson, Class "A" directors, Federal Reserve Bank of Chicago; and Frank W. Naylor,² chairman of the Farm Credit Administration Board.

The nonfederal defendants include the Federal Land Bank of Omaha, Federal Land Bank Association of Harlan, Federal Land Bank Association of Manchester, Federal Land Bank Association of Sioux City, Federal Land Bank Association of Storm Lake, Sheldon Production Credit Association, Federal Intermediate Credit Bank of Omaha, John Harling, the president of Farm Credit Banks of Omaha, and Loan Officers Ron Nagel, John Stoll, Charles R. Van Dyke, Michael Bergland, David Apple-by, Melinda Megal, Richard Haack and Dan Dreesen. Before addressing the motions, the Court believes that a short explanation on the interrelation of the defendants is in order.

The Farm Credit Administration (FCA) is one of several agencies established under the banking provisions (Title 12) of the United States Code. The FCA's function is similar to that of the Comptroller of Currency's in that the FCA charters, supervises and regulates lending institutions. See 12 U.S.C. § 2252. The FCA's authority derives from the Farm Credit Act of 1971, as amended, 12 U.S.C. § 2001, et seq. As a result of the Farm Credit Amendments Act of 1985, Pub.L. No. 99-205 (Dec. 23, 1985), a three-member Farm Credit Administrative Board sets the agency's general policy. The Board's chairman serves as the FCA's chief executive officer. The FCA is solely a regulatory agency and has no statutory authority to lend funds. As the FCA is a federal agency, a suit against it is a suit against the United States.

The FCA oversees approximately 400 federally-chartered, privately-owned and capitalized agricultural lending institutions comprising the Farm Credit System. The System is divided into twelve Farm Credit Districts. Each District contains a Federal Land Bank (FLB), a Federal Intermediate Credit Bank (FICB) and a Bank for Cooperatives (BC). Each District also contains a number of Federal Land Bank Associations (FLBA) and Production Credit Associations (PCA). Each District has a board of directors elected by bank stockholders.

Each banking institution within the System operates under a board of directors which is responsible for the institution's management. 12 U.S.C. §§ 2012, 2033, 2072, 2093, 2122 and 2227. Each institution is a citizen of the state in which its principal office is located, 12 U.S.C. § 2258, and has the authority to make loans without day-to-day supervision by the FCA. 12 U.S.C. §§ 2012(6), 2072(6), 2093(13). System institutions are not considered federal agencies. See S.Rep. No. 350, 86th Cong., 1st Sess. 8 (1959) (system institutions, unlike federal agencies, cannot assert the defense of sovereign immunity).

The FLBs make loans and provide technical assistance and financially related services to eligible borrowers. 12 U.S.C. § 2012(6). FLB loans are made through borrower-owned FLBAs. See, generally, 12 U.S.C. § 2031 et seq. Every FLB borrower must own stock in a local FLBA in an amount not less than five and not more than ten percent of the face amount of the loan and determined by the FLB. 12 U.S.C. § 2034. The FICBs also make agricultural loans to PCAs and other financial institutions. 12 U.S.C. § 2074. Each PCA borrower is also required to own stock or participation certificates in the PCA.

The Federal Reserve System is the nation's central bank, consisting of (a) a seven-member Board of Governors, (b) twelve regional Federal Reserve Banks, (c) the Federal Open Market Committee, (d) the Federal Advisory Council, and (e) approximately 5,500 privately-owned commercial banks. The Federal Reserve System formulates and regulates monetary policy. The Federal Reserve Board is authorized to review the interest rate charged by member banks, 12 U.S.C. § 357. The Board also sets the amount of reserve that member banks must maintain against deposits. 12 U.S.C. § 461. Thus, these powers enable the Federal Reserve Board to regulate the ability of member banks to lend money.

The above discussion demonstrates that the nonfederal defendant lending institutions are not members of the Federal Reserve System. Instead, they are members of the Farm Credit System and are not commercial banks. The Federal Reserve Board has no authority over the FCA or its member institutions.

Plaintiffs' complaint contains ten counts. Both the federal and nonfederal defendants raise similar arguments in support of their motions to dismiss. The Court will consider each count separately. First, however, the Court will address defendants' contentions that plaintiffs lack standing to bring this action.

DISCUSSION

A. Standing.

In Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982), the Supreme Court summarized its prior holdings on the concept of standing. The court noted that "standing" involves both constitutional and practical considerations. Id. at 472, 102 S.Ct. at 758. On the constitutional side of the ledger, the court held that Article III requires the suing party to show that he personally has suffered an actual or threatened injury stemming from the defendants' conduct. Id. at 472, 102 S.Ct. at 758. A plaintiff must also demonstrate that his injury "fairly can be traced" to the defendants' actions, and a favorable decision is likely to redress his injury. Id. The Valley Forge decision also delineated practical factors which a court must consider in addition to Article III considerations:

"The plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties." Warth v. Seldin, 422 U.S. 490, at 499 95 S.Ct. 2197, at 2205, 45 L.Ed.2d 343 (1975). In addition, even when the plaintiff has alleged redressable injuries sufficient to meet the requirements of Art. III, the Court has refrained from adjudicating "abstract questions of wide public significance" which amount to "generalized grievances", pervasively shared and most appropriately addressed in the representative branches. Id., at 499-500 95 S.Ct. at 2205-06. Finally, the Court has required that the plaintiff's complaint fall within "the zone of interests to be protected or regulated by the statute or constitutional guarantee in question." Association of Data Processing Service Org. v. Camp, 397 U.S. 150, 153 90 S.Ct. 827, 830, 25 L.Ed.2d 184 (1970).

Id. at 474-75, 102 S.Ct. at 759-60 (footnotes omitted).

The plaintiffs in the case at bar allege that the federal defendants manipulated the economy through regulation of interest rates, forcing plaintiffs' farms into foreclosure. Plaintiffs also allege that all defendants violated the congressional mandate of the Farm Credit Act of 1971, 12 U.S.C. § 2001 et seq. The Court notes that plaintiffs' complaint is uncannily similar to the complaint dismissed in Bowling v. Block, 602 F.Supp. 667 (S.D.Ohio 1985); aff'd, 785 F.2d 556 (6th Cir.), cert. denied, 479 U.S. ___, 107 S.Ct. 112, 93 L.Ed.2d 60 (1986). In that case, the Court found:

An all-out assault on the operation of the Farm Credit System should not be waged in the courts, but at the congressional level. Many of the complaints plaintiffs have against the defendants involve duties and responsibilities for which the Farm Credit Act, and therefore, Congress, have specifically provided.... Further, many of the acts of the administration of which plaintiffs apparently complain were authorized by the broad discretionary powers granted by the Farm Credit Act. This court may not review such acts even if it believed review were justified.

Id. at 674. Thus, while plaintiffs may arguably meet some standing requirements, this Court is persuaded that their complaint constitutes a "generalized grievance" better resolved in the legislative rather than the judicial arena. The Court will now address the specific arguments raised regarding each count of plaintiffs' complaint, in the interest of providing a complete record.

Count I

In Count I, plaintiffs argue that the credit extended to them was unconstitutionally created. Plaintiffs contend that the defendants' actions in making these loans available constitutes the creation of money, which is unconstitutional. Plaintiffs point to Art. I, Sec. 8., Cl. 5 of the United States Constitution, which holds that Congress...