State Nat'l Bank of Big Spring v. Lew

• Citation: 958 F.Supp.2d 127
• Decision Date: 01 August 2013
• Docket Number: Civil Action No. 12–1032(ESH).
• Parties: STATE NATIONAL BANK OF BIG SPRING et al., Plaintiffs, v. Jacob J. LEW et al., Defendants.
• Court: U.S. District Court — District of Columbia

958 F.Supp.2d 127

STATE NATIONAL BANK OF BIG SPRING et al., Plaintiffs,

v.Jacob J. LEW et al.,¹ Defendants.

Civil Action No. 12–1032(ESH).

United States District Court, District of Columbia.

Aug. 1, 2013.

Gregory F. Jacob, O'Melveny & Myers, LLP, Washington, DC, Alan McCrory Wilson, James Emory Smith, Jr., Office of the South Carolina Attorney General, Columbia, SC, Edward Scott Pruitt, Patrick R. Wyrick, Attorney General of Oklahoma, Oklahoma City, OK, for Plaintiffs.

Bradley Heath Cohen, Ethan Price Davis, Jonathan Gordon Cooper, U.S. Department of Justice, Washington, DC, for Defendants.

MEMORANDUM OPINION

ELLEN SEGAL HUVELLE, District Judge.

Plaintiffs State National Bank of Big Spring (“SNB” or the “Bank”), the 60 Plus Association (“60 Plus”), the Competitive Enterprise Institute (“CEI”) (collectively the “Private Plaintiffs”), and the States of Alabama, Georgia, Kansas, Michigan, Montana, Nebraska, Ohio, Oklahoma, South Carolina, Texas, and West Virginia (collectively “the States”) have sued to challenge the constitutionality of Titles I, II, and X of the Dodd–Frank Wall Street Reform and Consumer Protection Act, Pub.L. No. 111–203 (July 21, 2010) (the “Dodd–Frank Act”), as well as the constitutionality of Richard Cordray's appointment as director of the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”).² ( See generally Second Amended Complaint [ECF No. 24] (“Second Am. Compl.”).) Defendants, who include more than a dozen federal government officials and entities, have filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) on the grounds that plaintiffs lack Article III standing, or, in the alternative, that their claims are not ripe for review. For the reasons stated below, the Court will grant defendants' motion.

BACKGROUND

On July 21, 2010, Congress enacted the Dodd–Frank Act as “a direct and comprehensive response to the financial crisis that nearly crippled the U.S. economy beginning in 2008.” S.Rep. No. 111–176, at 2 (2010). The purpose of the Act was to “promote the financial stability of the United States ... through multiple measures designed to improve accountability, resiliency, and transparency in the financial system[.]” Id. Those measures included “establishing an early warning system to detect and address emerging threats to financial stability and the economy, enhancing consumer and investor protections, strengthening the supervision of large complex financial organizations and providing a mechanism to liquidate such companies should they fail without any losses to the taxpayer, and regulating the massive over-the-counter derivatives market.” Id. The Act “creat[ed] several new governmental entities, [ ] eliminate[ed] others, and [ ] transferr[ed] regulatory authority among the agencies.” ( See Defendants' Motion to Dismiss [ECF No. 26–1] (“Def. Mot.”) at 6.)

In this suit, plaintiffs challenge Title I of Dodd–Frank, which established the Financial Stability Oversight Council (“FSOC” or the “Council”), see12 U.S.C. § 5321; Title II, which established the Orderly Liquidation Authority (“OLA”), see12 U.S.C. § 5384; and Title X, which established the CFPB. See12 U.S.C. §§ 5491, 5511.³ Specifically, in Count III, the PrivatePlaintiffs challenge the constitutionality of Title I on separation-of-powers grounds, alleging that the FSOC “has sweeping and unprecedented discretion to choose which nonbank financial companies to designate as ‘systematically important’ ” and that such “powers and discretion are not limited by any meaningful statutory directives.” (Second Am. Compl. ¶ 8.) In Count I, the Private Plaintiffs challenge Title X on the grounds that it violates the separation of powers by “delegat[ing] effectively unbounded power to the CFPB, and coupl[ing] that power with provisions insulating the CFPB against meaningful checks by the Legislative, Executive, and Judicial Branches [.]” ( Id. ¶ 6.) And, in Count II, the Private Plaintiffs challenge the appointment of Richard Cordray as CFPB Director as unconstitutional on the grounds that he was appointed without the Senate's advice and consent in violation of the Appointments Clause of the United States Constitution. U.S. Const. art. II, § 2, cl. 2. ( See Second Am. Compl. ¶ 7.) ⁴

All plaintiffs challenge Title II on three separate grounds. In Count IV, they allege that Title II violates the separation of powers because it “empowers the Treasury Secretary to order the liquidation of a financial company with little or no advance warning, under cover of mandatory secrecy, and without either useful statutory guidance or meaningful legislative, executive, or judicial oversight.” (Second Am. Compl. ¶ 9.) In Count V, they allege that Title II violates the due process clause of the Fifth Amendment, because the “[t]he forced liquidation of a company with little or no advance warning, in combination with the FDIC's virtually unlimited power to choose favorites among similarly situated creditors in implementing the liquidation, denies the subject company and its creditors constitutionally required notice and a meaningful opportunity to be heard before their property is taken—and likely becomes unrecoverable[.]” (Id. ¶ 10.) And, in Count VI, they allege that Title II violates the constitutional requirement of uniformity in bankruptcy because “[w]ith no meaningful limits on the discretion conferred on the Treasury Secretary or on the FDIC, Title II not only empowers the FDIC to choose which companies will be subject to liquidation under Title II, but also confers on the FDIC unilateral authority to provide special treatment to whatever creditors the FDIC, in its sole and unbounded discretion, decides to favor[.]” (Id. ¶ 11.)

Defendants have moved to dismiss the complaint on the grounds that plaintiffs lack Article III standing to pursue their claims, or, in the alternative, that their claims are not ripe. ( See Def. Mot. at 4–5.) This is an unusual case, as plaintiffs have not faced any adverse rulings nor has agency action been directed at them. Most significantly, no enforcement action—“the paradigm of direct governmental authority”—has been taken against plaintiffs. FEC v. NRA Political Victory Fund, 6 F.3d 821, 824 (D.C.Cir.1993). As a result, plaintiffs' standing is more difficult to parse here than in the typical case. See, e.g., Noel Canning v. NLRB, 705 F.3d 490, 492–93 (D.C.Cir.2013) (employer challenged NLRB decision finding that it had violated the National Labor Relations Act). Furthermore, while the Bank is a regulated party under Title X, none of the plaintiffs is subject to regulation under Titles I or II. Nonetheless, plaintiffs maintain that they have standing to pursue their Title I and II claims, based, respectively, on their status as competitors and as creditors of the regulated entities.

ANALYSIS

I. LEGAL STANDARDS

Plaintiffs bear the burden of establishing that the Court has jurisdiction over their claims. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 104, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998). Nonetheless, “[f]or purposes of ruling on a motion to dismiss for want of standing, [the court] must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.” Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). “While the burden of production to establish standing is more relaxed at the pleading stage than at summary judgment, a plaintiff must nonetheless allege ‘general factual allegations of injury resulting from the defendant's conduct’ (notwithstanding ‘the court presumes that general allegations embrace the specific facts that are necessary to support the claim’).” ⁵Nat'l Ass'n of Home Builders v. EPA, 667 F.3d 6, 12 (D.C.Cir.2011). Moreover, where a court's subject matter jurisdiction is called into question, the court may, as it has done here, consider matters outside the pleadings to ensure that it has jurisdiction over the case. See Teva Pharms., USA, Inc. v. U.S. Food & Drug Admin., 182 F.3d 1003, 1006 (D.C.Cir.1999). “For each claim, if constitutional and prudential standing can be shown for at least one plaintiff, [the court] need not consider the standing of the other plaintiffs to raise that claim.” Mountain States Legal Found. v. Glickman, 92 F.3d 1228, 1232 (D.C.Cir.1996).

A. Standing

“[T]o establish constitutional standing, plaintiffs must satisfy three elements: (1) they must have suffered an injury in fact that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical’; (2) the injury must be ‘fairly traceable to the challenged action of the defendant’; and (3) ‘it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.’ ” NB ex rel. Peacock v. Dist. of Columbia, 682 F.3d 77, 81 (D.C.Cir.2012) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). Where a plaintiff is seeking declaratory or injunctive relief, he “must show he is suffering an ongoing injury or faces an immediate threat of injury.” Dearth v. Holder, 641 F.3d 499, 501 (D.C.Cir.2011).

It is well-established that where “the challenged regulations ‘neither require nor forbid any action on the part of [the challenging party],’— i.e., where that party is not ‘the object of the government action or inaction’—‘standing is not precluded, but it is ordinarily substantially more difficult to establish.’ ” Ass'n of Private Sector Colls. & Univs. v. Duncan, 681 F.3d 427, 457–58 (D.C.Cir.2012) (quoting Summers v. Earth Island Inst., 555 U.S. 488, 129 S.Ct. 1142, 173 L.Ed.2d 1 (2009)). “In that circumstance, causation and redressability ordinarily hinge on the responseof the regulated (or regulable) third party to the government action or inaction—and perhaps on the response of others as well.” Lujan, 504 U.S. at 562, 112 S.Ct. 2130. It then “becomes the burden of the plaintiff to adduce facts showing...