United States District Court, D. Columbia
COMMUNITY FINANCIAL SERVICES ASSOCIATION OF AMERICA, LTD., et al., Plaintiffs,
FEDERAL DEPOSIT INSURANCE CORPORATION, et al., Defendants
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COMMUNITY FINANCIAL SERVICES ASSOCIATION OF AMERICA, LTD.,
ADVANCE AMERICA, CASH ADVANCE CENTERS, INC., Plaintiffs:
David Henry Thompson, Harold Smith Reeves, Howard C. Nielson,
Jr., Charles John Cooper, COOPER & KIRK, PLLC, Washington,
FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant: Duncan
Norman Stevens, LEAD ATTORNEY, FEDERAL DEPOSIT INSURANCE
CORPORATION, Legal Division, Professional Liability Unit,
Arlington, VA; Erik Bond, LEAD ATTORNEY, FEDERAL DEPOSIT
INSURANCE CORPORATION, Corporate Litigation Unit, Arlington,
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Defendant:
Yvonne F. Mizusawa, LEAD ATTORNEY, FEDERAL RESERVE BOARD,
OFFICE OF THE COMPTROLLER OF THE CURRENCY, THOMAS J. CURRY,
in his official capacity as the Comptroller of the Currency,
Defendants: Peter Chadwell Koch, LEAD ATTORNEY, OFFICE OF THE
COMPTROLLER OF THE CURRENCY, Litigation Division, Washington,
THIRD PARTY PAYMENT PROCESSORS ASSOCIATION, Amicus: Ivan B.
Knauer, LEAD ATTORNEY, PEPPER HAMILTON, LLP, Washington, DC.
LIBRE INITIATIVE INSTITUTE, Amicus: Daniel Zachary Epstein,
LEAD ATTORNEY, CAUSE OF ACTION, Washington, DC.
STATE OF SOUTH CAROLINA, Amicus: Lewis Steven Wiener, LEAD
ATTORNEY, SUTHERLAND ASBILL & BRENNAN LLP, Washington, DC.
WILLIAM ISAAC, Amicus: Michelle Ann Scott, LEAD ATTORNEY,
AUBREY STONE, NATIONAL ORGANIZATION OF AFRICAN AMERICANS IN
HOUSING, Amicuses: Brandon David Almond, TROUTMAN SANDERS
LLP, Washington, DC.
TEAMSTERS NATIONAL BLACK CAUCUS, Amicus: Chrys D. Lemon, LEAD
ATTORNEY, MCINTYRE & LEMON, PLLC, Washington, DC.
Kessler, United States District Judge.
2014, Plaintiffs Community Financial Services Association of
America, Ltd. (" CFSA" ) and Advance America, Cash
Advance Centers, Inc. (" Advance America" ) filed a
Complaint against Defendants the Federal Deposit Insurance
Corporation (" the FDIC" ), the Board of Governors
of the Federal Reserve System (" the Board" ), and
the Office of the Comptroller of the Currency and Thomas J.
Curry, in his official capacity as the Comptroller of the
Currency (" the OCC" ). Plaintiffs seek declaratory
and injunctive relief to set aside certain informal guidance
documents and other actions by the FDIC, the Board, and the
OCC on the grounds that they exceed the agencies'
statutory authority, are arbitrary and capricious, were
promulgated without following the procedures required by law,
and deprive Plaintiffs of liberty interests without due
process of law.
matter is before the Court on Defendants' Motions to
Dismiss for Lack of Jurisdiction and for Failure to State a
Claim (collectively, " Motions to Dismiss" ) [Dkt.
Nos. 16, 17, 18], Plaintiffs' Motion for Jurisdictional
Discovery (" Motion for Discovery" ) [Dkt. No. 25],
and Plaintiffs' Motion for Leave to File a Second Amended
Complaint [Dkt. No. 56]. Upon consideration of the
motions, oppositions, replies, surreplies,
notices of support, response, the entire record herein, and
for the reasons stated below, the Motions to Dismiss are
granted in part and denied in part, the Motion for Discovery
is denied, and the Motion for Leave to File a Second Amended
Complaint is granted.
CFSA is a national trade organization that represents payday
lenders and Plaintiff Advance America is a payday lender and
member of CFSA. SAC ¶ ¶ 14-16. Payday lenders are
by and large licensed and regulated by the states, as well as
some federal consumer protection laws. Board Mot. at 3. The
Dodd-Frank Act gave the Consumer Financial Protection Bureau
(" CFPB" ) authority to supervise payday lenders
regulations pertaining to payday lending. See SAC ¶
¶ 39-41; Dodd-Frank Act Wall Street Reform and Consumer
Protection Act, 12 U.S.C. § 5491(a). CFPB is not a party
in this case.
FDIC is an independent agency and acts as the primary federal
regulator for certain state-chartered banks. In that
capacity, the FDIC prescribes standards to promote banks'
safety and soundness, and may do so by regulation or
guideline. The FDIC also examines banks, prepares examination
reports, and brings enforcement actions. See FDIC Mot. at 2;
FDIC, Who is the FDIC?, available at
OCC is an independent bureau within the U.S. Department of
the Treasury that functions as the primary supervisor of
federally chartered (national) banks and savings and loan
associations. The OCC administers statutory provisions
governing most aspects of the federal banking system and has
broad authority to examine the safety and soundness of the
banks it supervises. See OCC Mot. at 5; OCC, About the OCC,
available at http://www.occ.gov/about .
Board of Governors of the Federal Reserve System is a federal
agency authorized to regulate and examine bank holding
companies and state-chartered banks that are members of the
Federal Reserve System. State member banks that are regulated
by the Board are also regulated by state banking agencies.
See Board Mot. at 2-3.
lenders utilize the services of banks as part of their
business. For example, " [w]hen a prospective borrower
applies for the loan . . . he or she typically provides a
post-dated check or an electronic debit authorization for the
value of the loan, plus a fee. The lender immediately
advances the customer funds, then after a specified period of
time, usually determined by the customer's next payday,
the borrower returns to repay the loan and fee. But if the
customer does not return, the terms of the transaction permit
the lender to deposit the post-dated check or to execute the
debit authorization. In order to have that security, the
lender must have a deposit account with a bank and/or access
to the Automated Clearing House (ACH) network." SAC
¶ 28; see also OCC Motion to Dismiss (" OCC
Mot." ) [Dkt. No. 18-1] at 1 (" a payday lender
typically must submit checks provided by its borrowers
through the payment system by causing the checks to be
d-eposited at a bank." )
allege that Defendants participated and continue to
participate in a campaign initiated by the United States
Department of Justice (" DOJ" ), known as "
Operation Choke Point," to force banks to terminate
their business relationships with payday lenders. Operation
Choke Point has recently been the subject of a House
Committee Investigation and reports. See SAC ¶ ¶
56-58; STAFF OF H. COMM. ON OVERSIGHT & GOV'T REFORM,
113TH CONG., REP. ON THE DEP'T OF JUSTICE'S "
OPERATION CHOKE POINT" : ILLEGALLY CHOKING OFF
LEGITIMATE BUSINESSES? (Comm. Print 2014) (" Comm.
Report" ); STAFF OF H. COMM. ON OVERSIGHT AND GOV'T
REFORM, 113TH CONG., FEDERAL DEPOSIT INSURANCE
CORPORATION'S INVOLVEMENT IN " OPERATION CHOKE
POINT" (Comm. Print 2014) (" Comm. FDIC
allegedly forced banks to terminate relationships with
Plaintiffs and Plaintiffs' members by first promulgating
regulatory guidance regarding " reputation risk,"
and by later relying on the reputation risk guidance "
as the fulcrum for a
campaign of backroom regulatory pressure seeking to coerce
banks to terminate longstanding, mutually beneficial
relationships with all payday lenders." Pls.'
Opp'n at 9.
5, 2014, Plaintiffs filed their original Complaint against
Defendants asserting violations of the APA and due process
[Dkt. No. 1]. The First Amended Complaint was filed on July
30, 2014 (" FAC" ) [Dkt. No. 12]. On August 18,
2014, the Board filed its Motion to Dismiss for Lack of
Jurisdiction, or Alternatively for Failure to State a Claim
[Dkt. No. 16] (" Board Mot." ). The FDIC filed a
similar Motion [Dkt. No. 17] (" FDIC Mot." ), as
did the OCC [Dkt. No. 18] (" OCC Mot." ). On
October 2, 2014, Plaintiffs filed their Opposition to Motions
to Dismiss [Dkt. No. 23] (" Pls.' Opp'n" ).
following day, Plaintiffs filed a Motion for Discovery [Dkt.
No. 25] (" Discovery Mot." ). On October 31, 2014,
the Board filed its Reply in support of its Motion to Dismiss
[Dkt. No. 41] (" Board Reply" ) and its Opposition
to Plaintiffs' Motion for Discovery [Dkt. No. 42] ("
Board Discovery Opp'n" ); the FDIC filed its Reply
[Dkt. No. 46] (" FDIC Reply" ) and Opposition [Dkt.
No. 45] (" FDIC Discovery Opp'n" ); and the OCC
filed its Reply [Dkt. No. 44] (" OCC Reply" ) and
Opposition [Dkt. No. 43] (" OCC Discovery
Opp'n" ). Plaintiffs filed their Reply in support of
their Motion for Discovery [Dkt. No. 49] (" Pls.'
Discovery Reply" ) on November 10, 2014. Plaintiffs also
filed a Surreply to Defendants' Replies in Support of the
Motions to Dismiss [Dkt. No. 50] (" Pls.'
Surreply" ) the same day. In response, the FDIC filed a
Surreply [Dkt. No. 51] (" FDIC Surreply" ) on
November 14, 2014.
October 23, 2014, prior to the filing of Defendants'
Replies and Discovery Oppositions, Plaintiffs filed a Notice
of Supplemental Support [Dkt. No. 35] (" Pls.' First
Supp." ) notifying the Court of a letter from an FDIC
official to a depository institution. On December 12, 2014,
after briefing was complete on the Motions to Dismiss and the
Motion for Discovery, Plaintiffs filed a Second Notice of
Supplemental Support [Dkt. No. 52] (" Pls.' Second
Supp." ) to notify the Court of a U.S. House of
Representatives Committee Report on the FDIC's
involvement in Operation Choke Point. On December 23, 2014,
the FDIC filed a Response to Plaintiffs' Second
Supplemental Notice [Dkt. No. 53] (" FDIC Supp.
Second Amended Complaint
briefing was complete on the Motions to Dismiss and the
Motion for Jurisdictional Discovery, Plaintiffs filed a
Motion for Leave to File a Second Amended Complaint on April
10, 2015 [Dkt. No. 56]. Defendants' only opposition to
the Motion to Amend is that the proposed Second Amended
Complaint is futile because it does not overcome the alleged
deficiencies in the First Amended Complaint with regard to
standing and/or failure to state a claim. Consequently,
Defendants argue that the Motion to Amend should be denied as
futile. See Opp'ns to Motion to Amend. Because this Court
finds, infra, that Plaintiffs have standing and some claims
survive the Motions to Dismiss, and are therefore not futile,
Plaintiffs' Motion to Amend will be granted. For purposes
of deciding the Motions to Dismiss, the Court will rely on
the Second Amended Complaint [Dkt. No. 56-1] ("
SAC" ) in this Memorandum Opinion.
Standard of Review Under Fed.R.Civ.P. 12(b)(1)
courts of limited jurisdiction, federal courts possess only
specifically granted to them by Congress or directly by
the United States Constitution. Kokkonen v. Guardian Life
Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128
L.Ed.2d 391 (1994). The plaintiff bears the burden of
establishing by a preponderance of the evidence that the
Court has subject matter jurisdiction to hear the case. See
Shuler v. United States, 531 F.3d 930, 932, 382
U.S.App.D.C. 201 (D.C. Cir. 2008). In deciding whether to
grant a motion to dismiss for lack of jurisdiction under Rule
12(b)(1), the court must " accept all of the factual
allegations in [the] complaint as true." Jerome
Stevens Pharmaceuticals, Inc. v. Food & Drug Admin., 402
F.3d 1249, 1253-54, 365 U.S.App.D.C. 270 (D.C. Cir. 2005)
(quoting United States v. Gaubert, 499 U.S. 315,
327, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991)). The Court may
also consider matters outside the pleadings, and may rest its
decision on its own resolution of disputed facts. See
Herbert v. Nat'l Acad, of Sci., 974 F.2d 192,
197, 297 U.S.App.D.C. 406 (D.C. Cir. 1992).
threshold matter, Defendants argue that Plaintiffs do not
have standing. Article III of the Constitution limits the
jurisdiction of federal courts to certain " Cases"
and " Controversies." See U.S. Const. art. 3,
§ 2. " [N]o principle is more fundamental to the
judiciary's proper role in our system of government than
the constitutional limitation of federal-court jurisdiction
to actual cases or controversies." Clapper v.
Amnesty Int'l USA, 133 S.Ct. 1138, 1146, 185 L.Ed.2d
264 (2013) (quoting DaimlerChrysler Corp. v. Cuno,
547 U.S. 332, 341, 126 S.Ct. 1854, 164 L.Ed.2d 589, (2006)).
" One element of the case-or-controversy requirement is
that plaintiffs must establish that they have standing to
sue." Id. (internal quotation marks and
[T]he irreducible constitutional minimum of standing contains
three elements. First, the plaintiff must have suffered an
injury in fact . . . which is (a) concrete and
particularized, and (b) actual or imminent, not conjectural
or hypothetical. Second, there must be a causal connection
between the injury and the conduct complained of . . . Third,
it must be likely, as opposed to merely speculative, that the
injury will be redressed by a favorable decision."
Lujan v. Defenders of Wildlife, 504 U.S. 555,
560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (internal
quotation marks, citations, and footnote omitted).
A plaintiff's burden to demonstrate standing grows
heavier at each stage of the litigation." Osborn v.
Visa Inc., No. 14-7004, 797 F.3d 1057, 2015 WL 4619874,
at *5 (D.C. Cir. Aug. 4, 2015) (citing Lujan, 504 U.S. at
561). " At the pleading stage, general factual
allegations of injury resulting from the defendant's
conduct may suffice, for on a motion to dismiss we
'presume that the general allegations embrace those
specific facts which are necessary to support the
claim.'" Lujan, 504 U.S. at 561 (quoting Lujan
v. National Wildlife Federation, 497 U.S. 871, 889, 110
S.Ct. 3177, 111 L.Ed.2d 695 (1990)).
Court of Appeals recently reiterated and emphasized the
requirement that courts must " accept as true all
material allegations of the complaint" at the pleadings
stage. Osborn, 2015 WL 4619874, at *5 (internal citation
omitted). In Osborn, the Court of Appeals found that the
plaintiffs' alleged facts were " specific,
plausible, and susceptible to proof at trial," and
therefore they " pass[ed] muster for standing purposes
at the pleadings stage." Id. at *6.
When a plaintiff's asserted injury arises from the
Government's regulation of a third party that is not
before the court, it becomes 'substantially more
difficult' to establish standing." Nat'l
Wrestling Coaches Ass'n v. Dep't of Educ, 366
F.3d 930, 938, 361 U.S.App.D.C. 257 (D.C. Cir. 2004) (quoting
Lujan, 504 U.S. at 562). Where standing has been found on the
basis of third-party conduct, " the record presented
substantial evidence of a causal relationship between the
government policy and the third-party conduct, leaving little
doubt as to causation and the likelihood of redress."
Id. at 941. Therefore, while the Court accepts as
true all material allegations made by Plaintiffs, Plaintiffs
bear a greater burden of what they must allege in order to
show standing on the basis of third-party conduct.
case, the elements of causation and redressability "
hinge on the independent choices of the regulated third
party," namely the banks. Id. at 938. While it
is Plaintiffs' burden to " adduce facts showing
that' those choices have been or will be made in such a
manner as to produce causation and permit redressability of
injury," Id. (quoting Lujan, 504 U.S. at 562)
(emphasis added), at the motion to dismiss stage, Plaintiffs
need only allege facts that are " specific, plausible,
and susceptible to proof at trial." Osborn, 2015 WL
4619874 at *14.
Injury in Fact
do not dispute that Plaintiffs have suffered an injury in
fact. CFSA's members, including Plaintiff Advance
America, have lost beneficial banking relationships, causing
them on short notice to lose business and expend resources to
locate new banking partners. Pls.' Opp'n at 11. Many
payday lenders have not been able to replace the terminated
bank relationships. Id. Plaintiffs have also alleged
that Defendants' actions have deprived them of their
ability to compete for banks' resources and have
stigmatized them. Id. at 12-13.
it is clear that Plaintiffs have alleged facts sufficient to
show an injury in fact at the pleadings stage.
argue that Plaintiffs do not meet the causation prong of
standing because their injuries are not " fairly
traceable" to any acts by the Defendants, and that it
was the independent decisions of the respective banks to
terminate their relationships with Plaintiffs' members.
See Board Mot. at 10-11; FDIC Mot. at 12, 15.
causation, Plaintiffs must show that the Defendants'
actions were a " substantial factor motivating the
decisions of the third parties that were the direct source of
the [P]laintiff [s'] injuries." National Wrestling
Coaches, 366 F.3d at 940-41. Thus the key issue is the degree
of Defendants' alleged involvement or ...