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 (1970); 28 U.S.C. § 1331; Robbins v. Reagan, 250 U.S. App. D.C. 375, 780 F.2d 37, 43 (D.C. Cir. 1985), review in this Court is appropriate.
B. THE OTS' Failure To Provide For Notice And An Opportunity For Public Comment Is A "Case or Controversy. "
According to the OTS, the peculiar nature of the harm involved here shows that no case or controversy is present for the Court to adjudicate.
(Def.'s Mot. to Dismiss or for Summ. J. at 20-23.)
The OTS' argument fails for two reasons. First, the OTS' argument is founded on the faulty premise that TDA is challenging a specific transaction, instead of rule-making procedures. As indicated supra, TDA's complaint challenges the rule-making procedures; not specific conversions as argued by the OTS.
Second, TDA's members are harmed by the passage of the Interim Final Rule without notice and comment. Under Article III of the Constitution, district courts may only hear actual cases or controversies. This Circuit has previously held that a challenge to an agency's promulgation of an interim final rule without notice and comment is a case or controversy. see e.g. Tennessee Gas Pipeline Co. V. Federal Energy Regulatory Comm'n, 297 U.S. App. D.C. 141, 969 F.2d 1141 (D.C. Cir. 1992).
Clearly in this case there is a case or controversy. The Interim Final Rule mandates the use of a local depositor preference whenever an association oversubscribes. TDA has several members who are not "local" depositors, as defined by the statute. Consequently, TDA members have been affected by the passage of the Interim Final Rule. Therefore, there is a live case or controversy for the Court to hear.
II. THE OTS' PASSAGE OF AN INTERIM FINAL RULE WITHOUT PRIOR NOTICE AND AN OPPORTUNITY FOR COMMENT WITHOUT "GOOD CAUSE" VIOLATES THE ADMINISTRATIVE PROCEDURE ACT.
Section 553 of the Administrative Procedure Act ("APA") prescribes the general notice and comment procedures an agency must follow in promulgating a rule. Under the APA, an agency must publish notice of a proposed rule in the Federal Register and allow interested parties to submit comments on the proposed rule. 5 U.S.C. § 553 (1970). The APA does, however, recognize an exception to these procedures. An agency may suspend general notice and comment procedures if the agency "for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest." 5 U.S.C. § 553(b)(3)(B) (1970).
The OTS claims that it has satisfied the "good cause" standard. However, the Court is unpersuaded by the OTS' argument for three reasons. First, the OTS has argued incorrectly that the "good cause" standard is met if the entire rule is justified. Second, the facts cited by the OTS are not the equivalent of an emergency situation. Last, the combined weight of those facts also do not amount to an emergency situation. Therefore, the Court holds that the OTS has failed to satisfy the "good cause" standard.
A. The "Good Cause" Standard Is Not Met Merely By Showing A Justification For The Entire Rule Rather Than The Specific Provision That Has Been Challenged By TDA.
Relying on American Fed'n of Gov't Employees v. Block, 210 U.S. App. D.C. 336, 655 F.2d 1153 (D.C. Cir. 1981), the OTS asserts that the good cause standard is satisfied "if there is a justification for the rule as a whole, and the various provisions of the rule are rationally related to the justification." (Def.'s Mot. to Dismiss or For Summ. J. at 24.) (emphasis added). In that case, the court held that the Department of Agriculture had good cause to issue rules without public notice and comment. Id. at 1154.
Nevertheless, American Federation is factually inapposite to the instant situation. First, the court in that case found that the agency issued the regulations in response to a court order. Id. at 1157. Clearly there has been no such order in this case. Second, the American Federation plaintiffs challenged the entire rules, Id. at 1155,; not a specific section. Nothing in the case suggested that a Plaintiff is foreclosed from challenging a particular provision of a rule. More importantly, the OTS has misinterpreted American Federation.
The OTS has relied upon a footnote to conclude that the "good cause" standard is satisfied only when the entire rule is scrutinized. (Def.'s Mot. to Dismiss or for Summ. J. at 23.) However, that footnote expressed the court's competing concerns in deciding whether good cause existed with respect to the challenged rule, rather than a standard to apply in deciding the "good cause" issue. American Federation, 655 F.2d at 1157 n.7. Given the context of footnote seven, it does not, as the OTS suggests, imply that the good cause standard is to be analyzed with respect to the entire rule. Therefore, the OTS is incorrect in stating that the good cause standard is met if there is a justification for the rule as a whole.
B. None Of The Factors Cited By The OTS Constitute An Emergency Situation That Would Justify The Avoidance Of The APA's Notice And Comment Procedures.
In referring to the "good cause" exceptions to the notice and comment procedures, this Circuit has stated that these exceptions "will be narrowly construed and only reluctantly countenanced." E.g. State of New Jersey, Dep't of Envtl. Protection v. EPA, 200 U.S. App. D.C. 174, 626 F.2d 1038, 1045 (D.C. Cir. 1980) (citations omitted). In fact, this Circuit has emphasized that the exceptions are "not 'escape clauses' that may be arbitrarily utilized at the agency's whim." American Federation, 655 F.2d at 1156 (citing S.Rep. No. 752, 79th Cong., 1st Sess. (1945), reprinted in Administrative Procedure Act, Legislative History, 79th Cong. 1944-46 at 200-01.) Consequently, the use of the "good cause" exception is limited to emergency situations.
The inquiry as to whether an emergency situation exists is necessarily "fact- or context-dependent." Mid-Tex Elec. Coop. Inc. v. FERC, 262 U.S. App. D.C. 61, 822 F.2d 1123, 1132 (D.C. Cir. 1987). Consequently, the Court will examine the various factors present in this case to determine if the good cause standard has been met.
1. Solicitation Of Public Comment On A Rule That Does Not Deal With The Local Depositor Preference Does Not Satisfy The Notice And Comment Requirements Of The APA.
In its Motion to Dismiss or for Summary Judgement, the OTS implies that it already had the benefit of public input on the rule at issue in this case. (Def.'s Mot. to Dismiss or for Summ. J. at 25.) According to the OTS, the public comments it solicited and received in response to a rule dealing with mutual-to-stock conversions were utilized by the OTS in its promulgation of the Interim Final Rule at issue in this case. Id. at 25. Consequently, the OTS argues that it had the benefit of public comment on the Interim Final Rule.
The Court is puzzled by this line of the OTS' argument. Indeed, the rule referred to by the OTS discussed the problems of insider abuse, not the requirement of a local depositor preference. Absent in the proposed rule cited by the OTS is a discussion of the possibility that the OTS would promulgate a rule that apportions stock subscription rights according to where investors live. Moreover, over half of the comments the OTS has received on the Interim Final Rule have addressed the geographic preference portion. This fact alone rebuts any suggestion by the OTS that the public had sufficiently commented on the rule. Therefore, the Court concludes that the public was denied an opportunity to comment on the Interim Final Rule; the OTS' assertions to the contrary notwithstanding.
2. The OTS Has Not Served The Public Interest In By-Passing Notice And Comment Procedures In This Situation.
The OTS has argued that the Interim Final Rule serves the public interest because the only alternative to issuing the rule was an administrative moratorium on conversions. (Def.'s Mot. to Dismiss or for Summ. J. at 24.) According to the OTS, such a moratorium is not in the public interest because it would prevent converting associations from raising capital in a favorable environment. Id. (quoting 59 Fed. Reg. at 22732.)
The Court finds that the OTS' argument is contrary to fact and case law. First, the OTS' actions contradict its argument. Despite arguing that notice and comment procedures had to be ignored to ensure access to capital for converting associations, the OTS has waived the local depositor preference for over eighteen (18) applicants. If the OTS were truly concerned with access to capital it would not have granted so many waivers.
Second, the OTS has not shown that access to capital would not be enhanced if all members of an association were allowed to participate equally.
Third, the jurisprudence of this Circuit further undercuts the OTS' argument. The OTS seems concerned that if it had waited and followed the traditional notice and comment procedures, many savings associations would have quickly submitted conversion applications before the new rule went into effect. Yet in 1992, this Circuit foreclosed such an argument in Tennessee Gas Pipeline Co. v. Federal Energy Regulatory Comm'n, 297 U.S. App. D.C. 141, 969 F.2d 1141 (D.C. Cir. 1987). In that case, the Commission issued, without prior notice and opportunity for comment, an interim final rule based upon the APA's "good cause" exception. Id. at 1143. The Commission's rationale was its fear that regulated entities would accelerate their activities to avoid the application of the new rule. Id. The court reasoned that, absent special circumstances, a regulated entity's acceleration of activity to avoid a new rule was not a "good cause." See Id. at 1145-46.
It follows from Tennessee Gas that the OTS can not justify use of the "good cause" exception out of fear that a savings association will apply for conversion before a new rule becomes effective.
3. Congressional Hearings And Legislation Introduced in Related Banking Areas That Do Not Specifically Address Geographic Preferences Are Not a "Legislative Demand For Action."