The opinion of the court was delivered by: STANLEY SPORKIN
This matter is before the Court on cross motions for summary judgment. Plaintiffs contend that the defendant Farm Credit Administration ("FCA") unlawfully rejected their applications to amend their charters pursuant to sections 2.0 and 2.10 of the Farm Credit Act of 1971 ("Act"), as amended, 12 U.S.C. §§ 2071(b)(8)(d), 2091(c)(4). Plaintiffs assert that the FCA's refusal to grant such charter amendments was "arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with law . . . [or] in excess of statutory jurisdiction [or] authority," within the meaning of the Administrative Procedure Act, 5 U.S.C. § 706(2). Plaintiffs seek an order from this Court approving their applications.
Defendants seek summary judgment or dismissal of plaintiffs' complaint. As to Count I of plaintiffs' complaint, defendants contend that summary judgment is warranted because the denial of the charter amendments by the Farm Credit Administration was a reasonable agency decision which is entitled to deference. As to Counts II through IV of plaintiffs' complaint, defendants argue that plaintiffs lack standing to maintain their claims. Alternatively, defendants assert that as a matter of law they are entitled to judgment.
The Court has jurisdiction of the parties and the subject matter of this case under the provisions of the Farm Credit Act of 1971, as amended, 12 U.S.C. §§ 2001-2279aa-14, and the Administrative Procedure Act. Venue is proper in this district under 28 U.S.C. § 1391 (b) and (e).
The Farm Credit System (hereinafter "the System") is a federally created nationwide network of cooperative, borrower-owned banks and lending associations that provide credit to American farmers. The banks and associations which comprise the System are federally chartered. These institutions are owned by their borrower members and operated on a cooperative basis. The Farm Credit Administration ("FCA") is an independent federal agency that is authorized to regulate the System. The FCA was created in 1933 to oversee the nation's farm credit system. Prior to the early 1980's, the System was financially sound and functioning well. The recession of the early 1980's had a devastating impact upon the financial stability of the System.
In response to this agricultural financial crisis, Congress passed a series of legislative acts in the late 1980's which were aimed at restructuring the 75-year-old Farm Credit System. This legislative initiative culminated in the passage of the Agricultural Credit Act of 1987, (1987 Act) Pub. L. 100-233, 101 Stat. 1568 (codified at 12 U.S.C. § 2001 et seq. (Supp. 1989).
The 1987 Act extensively reorganized the system, requiring the merger of some institutions, authorizing the mergers of others, and providing a new line of credit to guarantee bonds issued by the System. The legislation mandated the merger of two categories of banks, Federal Land Banks (FLBs) (which historically provided long-term financing to farmers) and Federal Intermediate Credit Banks (FICBs) (which historically raised capital for short and intermediate loans to farmers). The resulting institutions are called Farm Credit Banks (FCBs). Agricultural Credit Act of 1987, § 410, Pub. L. No. 100-233, 101 Stat. 1637, as amended, Pub. L. No. 100-399, 102 Stat. 999 (1988) (codified at 12 U.S.C. § 2011 note (Supp. 1989)). Each district within the Farm Credit System is served by a FCB.
The FCBs exercise a degree of supervisory authority over the associations that operate within the districts. See 1987 Act, §§ 1.3, 1.5, Pub. L. No. 100-233, 101 Stat. 1568, 1622-24 (1988) (codified at 12 U.S.C. §§ 2011-2013).
Prior to the 1987 Act, three different categories of Farm Credit System banks operated in each of the 12 geographic districts. First, the Federal Land Banks (FLBs) raised capital and provided long-term loans to farmers through their affiliated Federal Land Bank Associations (FLBAs) (which also serviced the bank loans). Second, the Federal Intermediate Credit Banks (FICBs), raised capital for intermediate- and short-term loans to farmers. The FICBs loaned their funds to affiliated Production Credit Associations (PCAs), which had the authority to make and service direct loans (short- and intermediate-term) to farmers. Finally, a bank for cooperatives, the third category of institution within the farm credit system, extended credit to marketing, purchasing, and business service cooperatives. The nation-wide system comprised 37 banks and nearly 800 affiliated FLBAs and PCAs, all of which were overseen by the Farm Credit Administration (FCA).
As a result of the 1987 Act, the Federal Land Bank Associations (FLBAs) were permitted to transform into direst lending agencies (now called Federal Land Credit Associations or FLCA's); similarly, PCAs were granted more independence. In addition, all FLCAs (formerly FLBAs) and PCAs which operated within "substantially the same geographic territory" were directed to submit a plan for voluntary merger to their stockholders. 1987 Act, § 411, Pub. L. No. 100-233, 101 Stat. 1568, 1638, as amended, Pub. L. No. 100-399, 102 Stat. 999 (codified at 12 U.S.C. § 2071 note (1988). However, the plan had to be approved by the supervising FCB and the FCA prior to being submitted to the stockholders of these institutions. Id. If the associations voted to merge, the resulting association, an Agricultural Credit Association (ACA), would be formed. An ACA possesses the combined lending authority of a PCA and FLCA, i.e. the authority to make short-term as well as long-term loans directly to farmers.
Plaintiff, Buckeye Production Credit Association ("Buckeye"), is a PCA chartered by the FCA with the power to make short- and intermediate-term loans within the territory defined in its charter. Buckeye was created by the merger of two former PCAs. Buckeye's chartered territory includes the following eleven (11) counties in Ohio: Crawford, Hancock, Hardin, Lucas, Marion, Morrow, Ottawa, Sandusky, Seneca, Wood, and Wyandot. Complaint, P 5. Plaintiff Federal Land Bank Association of Fostoria, FLCA ("Fostoria"), is an FLCA which resulted from the merger of four former FLBAs. Fostoria has the authority to make long-term loans to farmers within the territory reserved by its charter. Fostoria's chartered territory includes the following sixteen (16) Ohio counties: Crawford, Erie, Hancock, Henry, Huron, Lorain, Lucas, Marion, Ottawa, Paulding, Putnam, Sandusky, Seneca, Van Wert, Wood, and Wyandot. Complaint, P 6. Both Buckeye and Fostoria are products of the dramatic restructuring of the Farm Credit System that took place as a result of the 1987 Act. Both institutions are within the farm credit district that is overseen by the Louisville Farm Credit Bank.
Buckeye and Fostoria are two jointly managed companies that operate under the same service mark. As enumerated above, Buckeye and Fostoria have overlapping territory in nine Ohio counties. Buckeye also operates separately in two counties; Fostoria, in seven counties.
During the period of consolidations, which followed the passage of the 1987 Act, a four-state Agricultural Credit Association called Farm Credit Services of Mid-America ("Mid-America") resulted from the merger of many smaller PCAs and FLBAs. Mid-America is chartered by the FCA to offer long- and short-term credit in all of its geographic territory. The chartered territory of Mid-America includes the entire state of Indiana, most of Kentucky and Tennessee, and seventy-nine of Ohio's eighty-eight counties. Mid-America's territory overlaps with nine counties in which either Buckeye or Fostoria operate separately but not jointly.
In late January of 1989, Buckeye and Fostoria filed applications with the FCA to amend their charters to allow them to operate in all the counties in which each entity was doing business. See Letters from Leon Leiser to David Hill, (Jan. 26, 1989 & Jan. 31, 1989), Administrative Record, at 1-25 (AR). The effect of the charter amendments would have been to enable the two entities to compete directly, with the same lending authority as Mid-America, but without assuming the formal structure of an ACA. In support of their applications, the president of Buckeye and Fostoria, Leon Leiser, stated that the institutions wished to retain their present management structure and to avoid tax consequences of formerly merging into an ACA. On April 20, 1989, the FCA denied Buckeye's and ...