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TEXAS BANKERS ASSN. v. NCUA

May 31, 1995

Texas Bankers Association, Independent Bankers Association of Texas, Houston Community Bank, N.A., Humble National Bank, Independence Bank, N.A., OmniBank, N.A., Sterling Bank, and Compass Bank, Plaintiffs
v.
National Credit Union Administration, Defendant, and Communicators Federal Credit Union, Credit Union National Inc., and Texas Credit Union League, Defendant-Intervenors



The opinion of the court was delivered by: JOHN H. PRATT

 Before the Court are cross motions for summary judgment concerning the propriety of the National Credit Union Administration's ("NCUA") approval of the expansion of the jurisdiction of Communicators Federal Credit Union ("Communicators") to include seven unrelated occupational groups and a "regional senior citizen/retiree association". After consideration of the briefs, and arguments made at the April 28, 1995 motions hearing, the Court concludes that the NCUA properly approved the addition of unrelated occupational groups to Communicators. On the other hand, we determine that the NCUA's approval of the expansion of Communicators to include the "regional senior citizen/retiree association" was improper. Accordingly, defendant's and defendant/ intervenors' motions for summary judgment are granted in part and denied in part and plaintiffs' motion for summary judgment is denied in part and granted in part.

 I. Background

 This is the second time the Court stands on the fault line between national banks and federal credit unions. *fn1" Credit unions receive certain preferred treatment, such as tax exempt status, that banks believe give credit unions a competitive advantage. See 12 U.S.C. § 1768 (tax exemption). Banks have looked to the "common bond provision," section 109 of the Federal Credit Union Act ("FCUA"), *fn2" in their attempts to limit the expansion of credit unions. The common bond provision holds that "Federal credit union membership shall be limited to groups having a common bond of occupation or association, or to groups within a well-defined neighborhood, community or rural district." § 1759. Both cases before this Court relate to this provision.

 In the earlier case, First Nat'l Bank & Trust Co. v. Nat'l Credit Union Admin., 863 F. Supp. 9 (D.D.C. 1994), appeal docketed, No. 94-5295 (D.C. Cir. Sept. 30, 1994) ("First Nat'l"), we considered the extent to which unrelated groups, each with a common bond among its members, could join the same credit union. For ease of reference we will refer to this as the "multiple group policy." We concluded that the statute was ambiguous in this regard, and deferred to the reasonable interpretation of the NCUA. The present case requires consideration of both the multiple group policy at issue in First Nat'l, and whether the senior citizen/retiree group at issue has an associational common bond to support its inclusion by Communicators.

 Defendant-intervenor Communicators is a Houston, Texas based federal credit union which currently serves 93 different groups with a membership of 38,283. *fn3" At issue are several expansions to Communicators which the NCUA approved between September 1993 and February 1994. *fn4" Seven expansion groups which were added under the multiple group policy are unrelated occupational groups. These groups are composed of employees in particular businesses. The eighth group, also allegedly joined under the multiple group policy, is more complex. It is a purported association covering all retirees or senior citizens *fn5" living or working within a 25 mile radius of Communicators' offices.

 Plaintiffs opposing these expansions are six state and federally chartered commercial banks in competition with Communicators and two trade associations representing the interests of commercial banks in Texas. Plaintiffs seek injunctive and declaratory relief vacating the additions as "arbitrary and capricious, and an abuse of discretion" under the Administrative Procedure Act. 5 U.S.C. § 706(2)(A). The matter has been extensively briefed by all parties, the chief emphasis being on the propriety of Communicators' attempted inclusion of the senior citizen/retiree group.

 Using defendants' more conservative figures, the senior citizen/retiree group adds to the credit union approximately 478,000 potential members in three nearby Texas counties. The NCUA has attempted to justify the addition of so large and varied a group of senior citizens on the basis of its so-called "senior/citizen retiree" policy, first adopted in 1984. See Interpretive Ruling and Policy Statement ("IRPS") 84-1, 49 Fed. Reg. 46,536. The NCUA forthrightly acknowledged in IRPS 84-1 that

 
legitimate concern has been expressed that simply authorizing Federal credit unions to serve all senior citizens and retirees in their area may not meet the statutory requirement of an occupational or associational common bond.

 Id. at 46,539. This concern, while commendable for its candor, understates the NCUA's problem given its rather restrictive requirements of an associational common bond. The NCUA limits putative associations to those "who participate in activities developing common loyalties, mutual benefits, and mutual interests." 59 Fed. Reg. 29,076. In determining whether a group satisfies these requirements, the NCUA understandably considers "the totality of the circumstances," including whether "members pay dues, have voting rights, . . . hold office, whether the group maintains a membership list, . . . the frequency of meetings and . . . interaction of members," and the "compactness" of the group's membership. *fn6" Id. On the other hand, "associations formed primarily to obtain a credit union charter do not have a sufficient associational common bond." 54 Fed. Reg. 31,168-69.

 Nevertheless, the NCUA adopted a policy encouraging credit unions to admit senior citizens into credit unions they could not otherwise lawfully join. 54 Fed. Reg. at 31,177. Existing credit unions are encouraged to "sponsor and assist" in the formation of regional associations of senior citizens who would then be able to join established credit unions under the multiple group policy. Id. The NCUA waived the normal rules excluding associations formed solely for purposes of securing credit union services. *fn7" The NCUA justified this policy because those over 50 years of age allegedly have a common bond that

 Defendant NCUA's motion for summary judgment, p. 20.

 Senior citizens in the Houston area are encouraged to join the newly created "Credit Union Link" ("CUL"). Defendants candidly concede that this purported association had no mission other than to secure credit union membership in Communicators for those over the age of 50. The activities of CUL are limited--when Communicators' employees indicate on the senior citizen's application that he or she has joined CUL, a "personalized welcome letter" and key chain are sent to the senior citizen, and there are purported plans to hold brown bag lunches to discuss "credit union services". Austin Affidavit submitted with Intervenor's motion for summary judgment at PP 13-16. The NCUA claims that this regional association, predicated on such minimal activities, has a requisite common bond among its "members."

 II. Analysis

 Fed. R. Civ. P. 56(c) permits a court to grant summary judgment where, as is the case here, the evidence in the record indicates that "there is no genuine issue as to any material fact and that the moving party is entitled ...


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