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The Loan Syndications and Trading Association v. Securities and Exchange Commission

United States District Court, District of Columbia

December 22, 2016

THE LOAN SYNDICATIONS AND TRADING ASSOCIATION, Plaintiff,
v.
SECURITIES AND EXCHANGE COMMISSION and BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Defendants.

          MEMORANDUM OPINION

          REGGIE B. WALTON, United States District Judge

         The plaintiff, the Loan Syndications and Trading Association, “a not-for-profit trade association representing members participating in the syndicated corporate loan market, ” Plaintiff's Motion for Summary Judgment (“Pl.'s Mot”), Exhibit (“Ex.”) A (Opening Brief of Petitioner (“Pet'r's Br.”)) at iii, brings this action against the defendants, the Securities and Exchange Commission (“SEC”) and the Board of Governors of the Federal Reserve System (the “Board”), seeking review of the final rules adopted by these and other agencies pursuant to Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Complaint (“Compl.”), Ex. A (Petition for Review) at 1. Currently before the Court are the Plaintiff's Motion for Summary Judgment and the Defendants' Motion for Summary Judgment (“Defs.' Mot.”).[1] After carefully considering these motions and the Administrative Record (“A.R.”), the Court concludes for the reasons that follow that it must deny the plaintiff's motion and grant the defendants' motion.[2]

         I. BACKGROUND

         A. The Dodd-Frank Act

         This case concerns the Office of the Comptroller of the Currency's, the Board of Governors of the Federal Reserve System's, the Federal Deposit Insurance Corporation's, and the SEC's (“the agencies'”)[3] joint implementation of an amendment to the Securities Exchange Act of 1934, added by Section 941 of the extensive Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). See Pub. L. No. 111-203, § 941, 124 Stat. 1376 (2010) (codified at 15 U.S.C. § 78o-11 (2012)). This amendment requires the agencies to “jointly prescribe regulations to require any securitizer to retain an economic interest in a portion of the credit risk for any asset that the securitizer, through the issuance of an asset-backed security, transfers, sells, or conveys to a third party.”[4] 15 U.S.C. § 78o-11(b)(1). Congress defined a “securitizer” as: “(A) an issuer of an asset-backed security; or (B) a person who organizes and initiates an asset-backed securities transaction by selling or transferring assets, either directly or indirectly, including through an affiliate, to the issuer.” Id. § 78o-11(a)(3). Congress further directed the agencies to require that securitizers retain “not less than [five] percent of the credit risk”, id. § 78o-11(c)(1)(B)(i), for all applicable assets, and to “establish appropriate standards for retention of an economic interest with respect to collateralized debt obligations, securities collateralized by collateralized debt obligations, and similar instruments collateralized by other asset-backed securities, ” id. § 78o-11(c)(1)(F). In addition, the agencies are permitted to provide “total or partial exemption[s]” for securitizations “as may be appropriate in the public interest and for the protection of investors.” Id. § 78o-11(c)(1)(G).

         B. Open Market Collateralized Loan Obligations

         The core of this case concerns the operation of the term “securitizer” and the corresponding joint regulation issued by the agencies to implement the credit risk retention mandate in relation to the entities and processes associated with collateralized loan obligations (“CLOs”). As the Court understands from the parties' filings, a CLO is a type of securitization or asset-backed security, backed by loans that are typically made from banks to commercial borrowers with low credit ratings or large debt obligations. See Pl.'s Mot., Ex. A (Pet'r's Br.) at 2 (“CLOs are securitizations backed by large loans generally originated by the largest U.S. banks and provided to large commercial enterprises with relatively high levels of debt . . . .”); Defs.' Mot., Ex. A (Brief for Respondents (“Resp'ts' Br.”)) at 5 (“A collateralized loan obligation . . . is a type of collateralized debt obligation . . . that is primarily backed by loans made to corporate borrowers without strong credit.”). The type of CLOs involved here are the so-called “open market CLOs.” Pl.'s Mot., Ex. A (Pet'r's Br.) at 7.

         Open market CLOs “securitize assets purchased on the primary or secondary markets based on the CLO's particular investment guidelines.” Defs.' Mot., Ex. A (Resp'ts' Br.) at 5-6; see also Pl.'s Mot., Ex. A (Pet'r's Br.) at 7. Open market CLOs are distinguished from “balance-sheet CLOs, which are instead designed by the owner of leveraged loans, ” Pl.'s Mot., Ex. A (Pet'r's Br.) at 7, and “generally securitize loans already held in an institution's portfolio, including assets it has originated, ” Defs.' Mot., Ex. A (Resp'ts' Br.) at 5. Essentially, managers of open market CLOs direct the purchase of loans in accordance with certain “investment parameters” negotiated with investors, Pl.'s Mot., Ex. A (Pet'r's Br.) at 7, through a special purpose vehicle, which is “formed expressly to issue the [asset-backed security], ” Defs.' Mot., Ex. A (Resp'ts' Br.) at 6. An open market CLO manager has a certain level of discretion in selecting loans on the market and later “operates the CLO and manages its loan portfolio.” Pl.'s Mot., Ex. A (Pet'r's Br.) at 8; see also Defs.' Mot., Ex. A (Resp'ts' Br.) at 6.

         C. The Agencies' Rulemaking

         The dispute before the Court evolves from the agencies' decision to regulate open market CLO managers pursuant to Section 941 of the Dodd-Frank Act. The defendants, along with the other relevant agencies identified earlier, supra at 2, issued a joint notice of proposed rulemaking and solicited comments on the Dodd-Frank Act's credit risk retention provisions. A.R. at ¶ 0176 (Credit Risk Retention, 76 Fed. Reg. 24090, 24090-91 (Apr. 29, 2011) (the “initial proposed rule”)). In this initial proposed rule, “[t]he Agencies noted that the second prong of” the statutory definition of “securitizer”[5] “is substantially identical to the definition of a ‘sponsor' of a securitization transaction in the [SEC's regulation] governing disclosures for [asset-backed security] offerings registered under the Securities Act.” Id. at ¶ 0184 (76 Fed. Reg. at 24098). This pre-existing regulation defines “a ‘sponsor' as a person who organizes and initiates an asset-backed securities transaction by selling or transferring assets, either directly or indirectly, including through an affiliate, to the issuing entity.” Id. at ¶ 0184 (76 Fed. Reg. at 24098 n.40 (citing 17 C.F.R. § 229.1101 (2014))). The agencies specifically noted that a “CLO manager generally acts as the sponsor by selecting the commercial loans to be purchased by an agent bank for inclusion in the CLO collateral pool, and then manages the securitized assets once deposited in the CLO structure.” Id. at ¶ 0184 (76 Fed. Reg. at 24098 n.42). Accordingly, the agencies decided that the definition of “securitizer” included open market CLO managers, and thus these managers would be subject to the statute's credit risk retention mandate. Id.

         The agencies also proposed a “menu of options approach” with regard to the statute's credit risk retention mandate. Id. at ¶ 0187 (76 Fed. Reg. at 24101). A securitizer could therefore satisfy its risk retention requirement under the proposed rules by either: (1) “retaining at least five percent of each class of [asset-backed security] interests issued as part of the securitization transaction” (“vertical risk retention”); (2) “retaining an ‘eligible horizontal residual interest' in the issuing entity in an amount that is equal to at least five percent of the par value of all [asset-backed security] interests as part of the securitization transaction” (“horizontal risk retention”); (3) retaining risk through “an equal combination of vertical risk retention and horizontal risk retention” (“L-shaped risk retention”); or (4) retaining risk in accordance with several other approaches not relevant here. Id. at ¶ 0187-89 (76 Fed. Reg. at 24101-03). The vertical risk retention option originally did not specify by what measurement the retention requirement would be satisfied “because the amount retained [in each class], regardless of method of measurement, should equal at least five percent of the par value (if any), fair value, and number of shares or units in each class.” Id. at ¶ 0187 (76 Fed. Reg. at 24101).

         The initial proposed rule garnered “comments from over 10, 500 persons, institutions, or groups, including nearly 300 unique comment letters.” Id. at ¶ 1203, 1208 (Credit Risk Retention, 78 Fed. Reg. 57928, 57933 (Sept. 20, 2013) (the “modified proposed rule”). The agencies considered these comments, modified the original proposal, and requested comment on the modified proposed rule. Id. In issuing these modified proposed rules, the agencies noted that many commenters were concerned about how several of the original proposed rules would affect open market CLOs. Id. at ¶ 1208 (78 Fed. Reg. at 57933) (“Several commenters criticized application of the original proposal to managers of certain collateralized loan obligation (CLO) transactions and argued that the original proposal would lead to more concentration in the industry and reduce access to credit for many businesses.”); JA1236 (78 Fed. Reg. at 57961) (“Many commenters, including several participants in CLOs, raised concerns regarding the impact of the proposal on certain types of CLO securitizations, particularly CLOs that are securitizations of commercial loans originated and syndicated by third parties and selected for purchase on the open market by asset managers unaffiliated with the originators of the loans (open market CLOs).”). The agencies reaffirmed their interpretation that “the CLO manager is a ‘securitizer'” under the statute and addressed various definitional concerns raised by the comments. Id. at ¶ 1236-37 (78 Fed. Reg. 57961-62). However, in recognizing that “the standard forms of risk retention in the original proposal could, if applied to open market CLO managers, result in fewer CLO issuances and less competition in this sector, ” the agencies developed revised risk retention options “designed to allow meaningful risk retention to be held by a party that has significant control over the underwriting of assets that are typically securitized in CLOs, without causing significant disruption to the CLO market.” Id. at ¶ 1237 (78 Fed. Reg. at 57962). The modified proposed rules permitted securitizers “to combine the horizontal, vertical, and L-shaped risk retention options into a single risk retention option with a flexible structure . . . using fair value, determined in accordance with U.S. generally accepted accounting principles.” Id. at ¶ 1212 (78 Fed. Reg. at 57937). In addition, the agencies provided that “an open market CLO could satisfy the risk retention requirement if the firm serving as lead arranger for each loan purchased by the CLO were to retain at the origination of the syndicated loan at least [five] percent of the face amount of the term loan tranche purchased by the CLO.” Id. at ¶ 1237 (78 Fed. Reg. at 57962).

         After reviewing the second round of comments on the modified proposed rule, the agencies jointly adopted the final credit risk retention rule. Id. at ¶ 2167 (Credit Risk Retention, 79 Fed. Reg. 77602, 77602 (Dec. 24, 2014) (to be codified at 17 C.F.R. pt. 246 and 12 C.F.R. pt. 244.) (the “final rule”)). In adopting the final rule, the agencies again addressed comments concerning the inclusion of CLO managers under the definition of “securitizer, ” and reaffirmed their determination that the definition covered CLO managers. Id. at ¶ 2218-20 (79 Fed. Reg. at 77653-55) (“[T]he agencies believe that the interpretation of ‘securitizer' to include CLO managers is reasonable.”). The agencies also adopted the use of fair value as a gauge for retained interest in the horizontal risk retention option, but decided in response to comments they received “not [to] require[ ] vertical interests to be measured using a fair value measurement framework” for both purely vertical holdings and combined partial vertical interests in a combination holding, because the agencies “were persuaded by commenters that such measurement is not necessary to ensure that the sponsor has retained [five] percent of the credit risk of the [asset-backed security] interests issued.” Id. at ¶ 2281 (79 Fed. Reg. at 77716). Thus, the final rules implemented (1) a purely vertical risk retention option that allows securitizers to retain the statute's absolute minimum amount of required risk, (2) the ability to mix and match horizontal and vertical holdings, and (3) an additional “lead arranger” retention option specifically for CLOs. Id. at ¶ 2178, 2216 (79 Fed. Reg. at 77613, 77651). Finally, the agencies concluded that they “did not believe that it would be appropriate to exempt open market CLOs from the risk retention requirement” and thus declined to create such an exemption or adjustment for them. Id. at ¶ 2221 (79 Fed. Reg. at 77656).

         D. Procedural History

         The plaintiff filed a petition for judicial review of the final rules in the United States Court of Appeals for the District of Columbia Circuit. See Loan Syndications & Trading Ass'n v. SEC, 818 F.3d 716, 719 (D.C. Cir. 2016). Following a show cause order and oral arguments on the jurisdictional question and merits of the petition, the District of Columbia Circuit determined that it lacked jurisdiction and transferred the case to this Court.[6] Id.

         The parties have now submitted for the Court's consideration the administrative record and the parties' appellate briefs as cross-motions for summary judgment. The plaintiff argues that, in violation of the Administrative Procedure Act (“APA”), 5 U.S.C. § 706(2)(A)-(C), the agencies, in their promulgation of the joint credit risk retention rules, arbitrarily and capriciously: (1) construed the term “securitizer” to include open market CLO managers, (2) required securitizers to retain a five percent interest based on fair value instead of “credit risk, ” and (3) declined to “exercise their exemption authority to permit open market CLO managers to retain credit risk at levels at or above the agencies' baseline level.” Pl.'s Mot., Ex. A (Pet'r's Br.) at 23-25

         The defendants contend in response that none of the plaintiff's arguments have merit. Defs.' Mot., Ex. A (Resp'ts' Br.) at 15. The defendants argue that the statutory language does not exempt open market CLO managers from the definition of “securitizer” as the plaintiff claims, and that the agencies' interpretation of “securitizer” is reasonable and entitled to deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Defs.' Mot., Ex. A (Resp'ts' Br.) at 16-17. Next, the defendants argue that the agencies' approach to prescribing the five percent retention requirement is “hardly unreasonable or irrational” merely because the agencies may have taken a different approach than those espoused by the plaintiff. Defs.' Mot., Ex. A (Resp'ts' Br.) at 18. Finally, the defendants assert that they “carefully assessed” the statutory provisions and “reasonably concluded” that the “relevant considerations” did not support the plaintiff's proposed exemption or adjustments. Id.

         II. STANDARD OF REVIEW

         Within the context of the APA, summary judgment is the mechanism for deciding whether an agency action is supported by the administrative record and is otherwise consistent with the APA standard of review as a matter of law. See, e.g., Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415 (1971). The APA “sets forth the full extent of judicial authority to review executive agency action for procedural correctness.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513 (2009). It requires courts to “hold unlawful and set aside agency action, findings, and conclusions” that are either “(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (B) contrary to constitutional right, power, privilege, or immunity; [or] (C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” 5 U.S.C. § 706(2)(A)-(C). However, “[t]he scope of review under the ‘arbitrary and capricious' standard is narrow and a court is not to substitute its judgment for that of the agency.” Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). Where Congress expressly delegates “authority to the agency to elucidate a specific provision of the statute by regulation, . . . any ensuing regulation is binding in the courts unless procedurally defective, arbitrary or capricious in substance, or manifestly contrary to the statute.” United States v. Mead Corp., 533 U.S. 218, 227 (2001). Nonetheless, the agency must “examine the relevant data and articulate a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.'” State Farm, 463 U.S. at 43 (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)). Courts “will uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned.” Pub. Citizen, Inc. v. FAA, 988 F.2d 186, 197 (D.C. Cir. 1993) (quoting Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286 (1974)).

         III. ANALYSIS

         A. Open Market CLO Managers as “Securitizers”

         The plaintiff asserts that the statutory term “securitizer” should not include managers of open market CLOs. Pl.'s Mot., Ex. A (Pet'r's Br.) at 27. Because the plaintiff's arguments on this issue concern the agencies' construction of the Dodd-Frank Act and the reasonableness of the agencies' definition, the Court must first determine whether the Chevron framework governs the Court's analysis. See Lewis v. Sec'y of Navy, __ F.Supp.3d __, __, Civ. No. 10-0842, 2016 WL 3659882, at *4 (D.D.C. 2016) (Walton, J.) (noting generally, “where agency action turns on questions of statutory interpretation, courts must utilize the two-step process established in Chevron” (citing Chevron, 467 U.S. at 842)). The Court concludes that (1) the two-step test under Chevron is appropriate to apply as a substantive standard for reviewing the agencies' construction of the statute; (2) Congress did not unambiguously foreclose the agencies' construction; and (3) the agencies' construction is reasonable.

         1. Applicability of the Chevron Framework

         Generally, claims contesting “an agency's construction of a statute administered by that agency” warrant application of the two-step framework adopted in Chevron. See United States v. Alaska, 503 U.S. 569, 575 (1992). As a threshold determination, a court must consider whether “Congress would expect the agency to be able to speak with the force of law.” Mead, 533 U.S. at 229. Next, a court considers under Chevron step one “whether Congress has directly spoken to the precise question at issue, ” and “[i]f the intent of Congress is clear, that is the end of the matter.” Chevron, 467 U.S. at 842. But, “if the statute is silent or ambiguous with respect to the specific issue, the question for the court [under Chevron step two] is whether the agency's answer is based on a permissible construction of the statute.” Id. at 843. In other words, a court must “defer to the agency's interpretation of the statute if it is reasonable and consistent with the statute's purpose.” Indep. Ins. Agents of Am., Inc. v. Hawke, 211 F.3d 638, 643 (D.C. Cir. 2000) (citing Nuclear Info. Res. Serv. v. Nuclear Regulatory Comm'n, 969 F.2d 1169, 1173 (D.C. Cir. 1992) (en banc)).

         The plaintiff contends that Chevron is not the appropriate framework to apply in considering the agencies' interpretation of the statutory definition of “securitizer” because “Chevron does not apply to agency interpretations of statutes . . . that are administered by multiple agencies.” Pl.'s Reply, Ex. A (Reply Brief of Petitioner (“Pet'r's Reply”) at 9 (quoting Benavides v. U.S. Bureau of Prisons, 995 F.2d 269, 272 n.2 (D.C. Cir. 1993)). The defendants respond that “Chevron deference does apply to the resolution of statutory ambiguity contained in joint regulations.” Defs.' Mot., Ex. A (Resp'ts' Br.) at 38 n.15 (citations omitted). The Court agrees with the defendants.

         Although it is true that the District of Columbia Circuit recognizes that “[j]ustifications for deference begin to fall when an agency interprets a statute administered by multiple agencies, ” DeNaples v. Office of Comptroller of Currency, 706 F.3d 481, 487 (D.C. Cir. 2013) (citing Bowen v. Am. Hosp. Ass'n, 476 U.S. 610, 642 n.30 (1986)), the plaintiff fails to recognize that the District of Columbia Circuit typically distinguishes between “generic statutes that apply to dozens of agencies, and for which no agency can claim any particular expertise, ” Collins v. Nat'l Transp. Safety Bd., 351 F.3d 1246, 1252 (D.C. Cir. 2003) (citations omitted), and “statutes where expert enforcement agencies have mutually exclusive authority over separate sets of regulated persons, ” id. at 1253. Central to this distinction and the broader justification for Chevron deference is a consideration of whether two bases for presuming implied delegation are present: “specialized agency expertise and the greater likelihood of achieving a unified view through the agency than through review in multiple courts.” See id.; see also Bowen, 476 U.S. at 643 n.30 (concluding that a single agency's rulemaking did not command deference where twenty-seven agencies of varying fields of expertise separately “promulgated regulations forbidding discrimination on the basis of” disability in federal programs because the basis of expertise on which Chevron deference is predicated was absent).

         The specter of diminished agency expertise and potentially discordant rules does not loom in this case because the statutory mandate at issue does not encourage differing interpretations by various agencies. Rather, the statute provides that “the Federal banking agencies and the [SEC] shall jointly prescribe regulations.” 15 U.S.C. § 78o-11(b)(1) (emphasis added). Nothing in the Administrative Record suggests that the agencies did not fulfill the congressional mandate to jointly adopt uniform rules. See A.R. at ¶ 2167 (79 Fed. Reg. at 77602) (“The OCC, Board, FDIC, [SEC], FHFA, and HUD . . . are adopting [this] joint final rule . . . .”).

         Because this case presents a situation in which six agencies with overlapping expertise were explicitly tasked by Congress to jointly draft and adopt regulations as part of a coordinated endeavor, this Court declines to conclude that Chevron is not applicable simply because more than one agency was involved in the rulemaking. See Individual Reference Servs. Grp., Inc. v. FTC, 145 F.Supp.2d 6, 24 (D.D.C. 2001) (holding that where “the subject matter of the statute falls squarely within the agencies' areas of expertise, and the Regulations were issued as a result of a statutorily-coordinated effort among the agencies, Chevron is the governing standard”), aff'd sub nom. Trans Union LLC v. FTC, 295 F.3d 42 (D.C. Cir. 2002); see also New Life Evangelistic Ctr., Inc. v. Sebelius, 753 F.Supp.2d 103, 122-23 (D.D.C. 2010) (holding that “where multiple agencies are charged with administering a statute, a single agency's interpretation is generally not entitled to Chevron deference, ” but concluding that “there would be no comparable concern if all three agencies charged with administering the [statute in question] pressed the same interpretation before this Court”). Because this case concerns a single, unified rulemaking by six agencies with specialized expertise in the subject matter, the Court concludes that Chevron is the appropriate framework to apply in considering the plaintiff's arguments regarding the agencies' interpretation of the statutory definition of “securitizer.”

         Moreover, the Court is persuaded that “Congress would expect the agenc[ies] to be able to speak with the force of law, ” Mead, 533 U.S. at 229, because the Dodd-Frank Act explicitly tasked the agencies to “jointly prescribe regulations, ” 15 U.S.C. § 78o-11(b)(1). Thus, the threshold Chevron determination is satisfied, and the Court therefore proceeds to Chevron step one. See Mead, 533 U.S. at 229.

         2. Chevron Step One

         Under Chevron step one, the Court must first consider whether Congress clearly intended open market CLO managers to be excluded from the statute's definition of “securitizer.” See 15 U.S.C. § 78o-11(a)(3). In applying step one, courts examine the statute's “text, structure, purpose, and legislative history to determine if the Congress has expressed its intent unambiguously.” United States Sugar Corp. v. EPA, 830 F.3d 579, 605 (D.C. Cir. 2016) (citing Bell Atl. Tel. Co. v. FCC, 131 F.3d 1044, 1047 (D.C. Cir. 1997)). Courts must first “focus on the language of the statute.” Bell Atl., 131 F.3d at 1047. The plaintiff asserts that “[c]onstruing and applying the term ‘securitizer' should have been straightforward, ” Pl.'s Mot., Ex. A (Pet'r's Br.) at 27, and argues that the agencies “disregard[ed] the precise statutory language Congress used to define ‘securitizer, '” id. at 29. The Court is unpersuaded by this argument and concludes that Congress did not unambiguously foreclose CLO managers from inclusion under the statutory definition of “securitizer.”

         a. Congress's Broad Delegation of Authority

         The statute defines a “securitizer” as either “(A) an issuer of an asset-backed security; or (B) a person who organizes and initiates an asset-backed securities transaction by selling or transferring assets, either directly or indirectly, including through an affiliate, to the issuer.” 15 U.S.C. § 78o-11(a)(3). First, the Court notes that “Congress phrased the relevant provision broadly [by] employing [the] words . . . ‘directly or indirectly'” in the second prong of the definition. See Ass'n of Private Sector Colls. & Univs. v. Duncan, 681 F.3d 427, 444 (D.C. Cir. 2012) (describing “directly or indirectly” as “extremely broad language”) (citing Roma v. United States, 344 F.3d 352, 360 (3d Cir. 2003)). Second, the definition's scope is not necessarily restrictive because Congress employed the disjunctive “or” in joining both the (A) and (B) prongs of the statutory definition. See, e.g., Sabre, Inc. v. Dep't of Transp., 429 F.3d 1113, 1122 (D.C. Cir. 2005) (“Congress's use of ‘principal' and ‘agent' in the disjunctive does not necessarily indicate that Congress intended to limit the broad applicability of the two words. . . . [T]he Department could permissibly identify an independent [computer reservation system] as a ‘principal or agent' in the broad sense of a travel intermediary.”). Third, the Court notes that Congress explicitly exempted certain institutions and programs from the credit risk retention requirement, see § 78o-11(e)(3)-(4) (exempting loans supervised by the Farm Credit Administration, mortgages insured or guaranteed by the government, and qualified residential mortgages); if Congress had not intended for open market CLO managers to be defined as “securitizers” under the statute, it could have also included them in the list of exempted institutions and programs, see, e.g., Monongahela Power Co. v. Marsh, 809 F.2d 41, 49 (D.C. Cir. 1987) (stating that the omission of hydroelectric plants from the list of facilities exempted from certain administrative requirements suggests that Congress intended that the requirements would apply to hydroelectric plants). Congress's use of the phrase “directly or indirectly, ” its use of the word “or” as the connector of the definition's two prongs, and the failure to include open market CLO managers as an exempted class indicate that the statutory definition of “securitizer” was not unambiguously intended to exclude open market CLO managers from credit risk retention.

         In the absence of statutory clarity, “the court may be forced to look to the general purpose of Congress in enacting the statute and to its legislative history for helpful cues.” United States v. Braxtonbrown-Smith, 278 F.3d 1348, 1352 (D.C. Cir. 2002). In addition, the Court recognizes that “[i]t is a ‘fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.'” FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) (quoting Davis v. Michigan Dept. of Treasury, 489 U.S. 803, 809 (1989)).

         The plaintiff's assertion that Congress was principally concerned with abuses in the “originate-to-distribute” model, and thus not with open market CLOs, Pl.'s Mot., Ex. A (Pet'r's Br.) at 37, is under-inclusive in light of the overall context and legislative history, which support the view that Congress intended to broadly delegate the task of regulation in this complex market to the expert agencies. Cf. Nat'l Ass'n of Regulatory Util. Comm'rs v. FCC, 525 F.2d 630, 636 (D.C. Cir. 1976). The relevant Senate Report that accompanies the pertinent provision of the Dodd-Frank Act expresses Congress's intent to address the “[c]omplexity and opacity in securitization markets [that] created the conditions that allowed the financial shock from the subprime mortgage sector to spread into a global financial crisis.” S. Rep. No. 111-176, at 128 (2010). The fact that Congress delegated to the agencies the responsibility to “recognize differences . . . [and] make appropriate adjustments” to advance the legislative goals, id. at 130, rather than delineate specifics in the legislation itself, supports the view that Congress was primarily focused on ensuring that certain actors in the securitization market had “skin in the game, ” id. at 129, but did not itself desire to tackle the precise complexities of the market Instead, Congress “expect[ed] that these regulations will recognize differences in the assets securitized, in existing risk management practices, . . . and that regulators will make appropriate adjustments to the amount of risk retention required, ” id. at 130.

         b. The Definitions of “Securitizer” and ...


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