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THRIFT DEPOSITORS OF AMERICA, INC. v. OFFICE OF TH

September 29, 1994

THRIFT DEPOSITORS OF AMERICA, INC., Plaintiff,
v.
OFFICE OF THRIFT SUPERVISION, Defendant.



The opinion of the court was delivered by: CHARLES R. RICHEY

 UNITED STATES DISTRICT JUDGE

 INTRODUCTION

 Before the Court are Cross-Motions for Summary Judgment. In light of the papers filed by the parties, the underlying law, and the record herein, the Court shall grant Plaintiff's Motion for Summary Judgment. After a careful analysis of the foregoing, the Court holds that the Interim Final Rule granting a purchase preference to "local" depositors is void.

 BACKGROUND

 On May 6, 1994, TDA filed a complaint with the Court seeking declaratory and injunctive relief. Three days later, TDA moved for a Preliminary Injunction to prevent the OTS from approving any pending conversion applications pursuant to the Interim Final Rule. At a May 12, 1994, status conference the Court dismissed TDA's action without prejudice based upon the parties' representations that the pending conversion applicants had, or will, seek a waiver of the local depositor preference. For six weeks subsequent to the Court's Order, the OTS waived the application of the local depositor preference. However, the OTS, in a reversal of its previous policy, has ceased to grant waivers of the preference except on a case-by-case. Consequently, TDA reopened this lawsuit on July 7, 1994.

 FACTS

 The facts material to this action are not in dispute. *fn2" On May 3, 1994, the OTS simultaneously published proposed changes to its mutual-to-stock conversion *fn3" regulations for savings associations and adopted the proposed changes as an Interim Final Rule. The Interim Final Rule applies to conversions that are "pending or filed on or after May 3, 1994." 59 Fed. Reg. at 22,725 (1994). Prior to the adoption of the Interim Final Rule, the OTS had received general comments regarding broad issues surrounding mutual-to-stock conversions. Nevertheless, the actual Interim Final Rule was issued without prior notice and opportunity for comment in reliance on the "good cause" exception of the Administrative Procedure Act.

 The Interim Final Rule gives priority stock subscription rights for converting mutual savings associations to "local" depositors whenever a conversion stock offering oversubscribes. A local depositor is one who "reside[s] in the association's 'local community' or within 100 miles of a home or branch office of the converting association." 59 Fed. Reg. 22,728 (1994). Non-local depositors are not guaranteed the right to participate in the conversion process. Although the OTS has previously allowed converting associations to rank stock purchases based upon geography in certain circumstances, the Interim Final Rule's preference is the first time within the past twenty years that the OTS has required a geographic preference for "local" depositors. The Interim Final Rule permits the OTS to "grant on a case by case basis, a waiver in writing from any provision in the interim final rule for good cause shown." 59 Fed. Reg. at 22,732 (1994).

 DISCUSSION

 Summary judgement shall be rendered upon a showing that there is no genuine issue as to any material fact and that the moving party is entitled to a judgement as a matter of law. Fed. R. Civ. P. 56(c); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); Frito-Lay, Inc. v. Willoughby, 274 U.S. App. D.C. 340, 863 F.2d 1029, 1032 (D.C. Cir. 1988).

 I. SINCE TDA IS CHALLENGING THE OTS' ISSUANCE OF THE INTERIM FINAL RULE AND TDA MEMBERS HAVE BEEN AFFECTED, THIS COURT HAS JURISDICTION TO HEAR THE CASE.

 The Defendants have raised two objection to jurisdiction. First, they claim that this court does not have subject-matter jurisdiction and, second, that the "case or controversy" requirement of Article III has not been met.

 In its argument, the OTS initially claims that this Court lacks subject-matter jurisdiction because Congress specifically vested the Courts of Appeals with exclusive jurisdiction in challenges to the Director of the OTS' approval of mutual-to-stock conversions. (Def.'s Mot. to Dismiss or for Summ. J. at 20.) According to the OTS, since TDA members are only harmed if the Director has approved a particular mutual-to-stock conversion with the local depositor preference, TDA is really challenging specific transactions and not the interim rule itself. Id. at 20-21.

 The Court finds that it has jurisdiction to hear the case because TDA has challenged the rule-making procedure, and because the Interim Final Rule was passed without complying with notice and comment procedures.

 A. TDA's Challenge To The Issuance Of An Interim Final Rule Without Prior Notice And An Opportunity For Comment Vests This Court With Jurisdiction.

 In determining Jurisdiction, Courts traditionally apply the "well-pleaded complaint rule." see Franchise Tax Bd. of the State of California v. Construction Laborers Vacation Trust for So. California, 463 U.S. 1, 13, 77 L. Ed. 2d 420, 103 S. Ct. 2841 (1983); Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149, 53 L. Ed. 126, 29 S. Ct. 42 (1908); Commercial Union Ins. Co. v. United States, 303 U.S. App. D.C. 33, 999 F.2d 581, 584-85 (D.C. Cir. 1993). According to the rule, the Court is to examine the Plaintiff's well-pleaded complaint to determine if the Court has jurisdiction. Id. In examining the complaint, the Court is mindful of the rule that "the party who brings suit is master to decide what law he will rely upon." Bell v. Hood, 327 U.S. 678, 681, 90 L. Ed. 939, 66 S. Ct. 773 (1946); see Harper v. McDonald, 220 U.S. App. D.C. 137, 679 F.2d 955, 956-58 (D.C. Cir. 1982) (per curiam).

 In contesting jurisdiction, the OTS has twisted the Plaintiff's complaint. Ignoring the plain language of the complaint, the OTS asserts that TDA is only contesting specific transactions. If the OTS' assertions were true, it follows that the Court of Appeals, by statute, is vested with exclusive jurisdiction to hear the dispute. 12 U.S.C. § 1464(i)(2)(B)-(j) (1989).

 Yet a simple reading of the complaint reveals the fallacy of the OTS' argument. In its Complaint, TDA states that "the OTS adopted the Interim Final Priority Regulations without prior notice and public comment and without "good cause" for dispensing with the notice and comment procedures, as required under the APA." (Compl. for Declaratory and Prelim. Inj. Relief P 15.) Furthermore, Plaintiff's requested relief is for a declaration that the "Interim Final Priority Regulations" are void. Id. No where in Plaintiff's complaint are there challenges to specific transactions as suggested by the Defendant.

 Since Plaintiff challenges the adoption of the regulations rather than a specific transaction, the Court looks to the general provisions of the Home Owners Loan Act in determining jurisdiction. According to the Home Owners Loan Act, the OTS is authorized to adopt regulations affecting savings association. 12 U.S.C. § 1464(d)(3). These general provisions do not require judicial review in any particular judicial forum. Therefore, since the Districts Courts have the power to review procedural challenges under the APA, see 5 U.S.C. § 702 ...


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