United States District Court, E.D. Virginia, Alexandria Division
C. Cacheris UNITED STATES DISTRICT COURT JUDGE
Independent Community Bankers of America, a trade association
that represents community banks, brings suit challenging
regulations adopted by Defendant National Credit Union
Administration. Defendant has filed a Motion to Dismiss [Dkt.
18] contending, in relevant part, that Plaintiff's suit
is time-barred and that Plaintiff lacks standing. The Court
agrees. Accordingly, the Court will grant Defendant's
Motion and dismiss Plaintiff's Complaint.
passed the Federal Credit Union Act, 12 U.S.C. § 1751,
et seq., in the midst of the Great Depression. The
Act authorizes the chartering of federal credit unions -
member owned and democratically operated financial
cooperatives that provide services similar to those offered
by banks. Defendant is an administrative agency charged with
overseeing federally chartered credit unions and
“administering the [Federal Credit Union Act].”
Nat'l Credit Union Admin. v. First Nat. Bank &
Trust Co., 522 U.S. 479, 483 (1998). Defendant's
authority also extends to state-chartered credit unions that
elect to be insured by the National Credit Union Share
Insurance Fund. See Credit Union Nat. Ass'n v.
Nat'l Credit Union Admin., 57 F.Supp.2d 294, 296
(E.D. Va. 1995).
case concerns regulations Defendant adopted pursuant to 12
U.S.C § 1757a(a), a provision of the Act titled
“Limitation on member business loans.” This
portion of the statute provides that “no insured credit
union may make any member business loan that would result in
a total amount of such loans outstanding at that credit
union” to exceed the lesser of “1.75 times the
actual net worth of the credit union” or 12.25% of the
credit union's assets. Id. The term
“member business loan” is defined as “any
loan, line of credit, or letter of credit, the proceeds of
which will be used for a commercial, corporate, or other
business investment or venture, or agricultural
purpose.” Id. § 1757a(c)(1)(A). At issue
here is whether and to what extent this limitation applies to
interests in loans made to persons not members of a
given credit union that are acquired, but not originated, by
that credit union.
1999, Defendant issued its first rule interpreting and
implementing these provisions of the Act. See 64
Fed. Reg. 28, 721 (May 27, 1999). The 1999 Rule provided that
“[u]nless otherwise exempt, ” interests in loans
acquired but not originated by a credit union “are to
be counted against the aggregate loan limit for the
participating credit union.” Id. at 28, 725.
The Rule did not distinguish between interests in loans made
to members and loans made to nonmembers.
2003, Defendant issued a notice of proposed rulemaking
stating that it had “reconsidered its position
regarding the treatment of loan participations by purchasing
credit unions and propose[d] to exclude participation
interests from the calculation of the aggregate [member
business loan] limit.” 68 Fed. Reg. 16, 450, 16, 451
(Apr. 4, 2003). The agency ultimately stopped short of
excluding all loan interests acquired, but not originated, by
a credit union from the statutory cap. Finding the
statute's language “lends itself to several
possible interpretations, ” Defendant adopted a rule
distinguishing between interests in loans made to credit
union members and interests in loans made to nonmembers. 68
Fed. Reg. 56, 537, 56, 539, 56, 543 (Oct. 1, 2003). While
interests in loans made to members remained subject to the
“Limitation on member business loans” cap, the
agency found that “purchases of nonmember loans and
participation interests . . . do not involve the provision of
member loan services, and the acquired loan assets are not
[member business loans].” Id. at 56, 544.
agency recognized that nonmember loans are “business
loan asset[s] with all of the attendant risks, ” and
noted that if abused, the new rule might provide a
“loophole” for credit unions. Id. at 56,
544. Accordingly, Defendant required credit unions to seek
approval from the agency's Regional Director before
purchasing an interest in a nonmember business loan when,
combined with the credit union's member business loans,
doing so would cause the credit union to exceed the statutory
cap. See id.
undertook its most recent rulemaking in 2015. The agency
primarily proposed to change the manner in which it regulates
member business loans, moving away from “prescriptive
underwriting criteria and waiver requirements in favor of a
principles-based approach to regulating commercial
loans.” 80 Fed. Reg. 37, 898, 37, 899 (July 1, 2015).
As part of that process, the agency proposed to eliminate the
requirement that credit unions seek approval before
purchasing interests in nonmember loans when doing so would
cause them to exceed the statutory cap. Id. at 37,
909-10. Instead, the purchase of such interests would be
subject to the same overarching principles applicable to
other commercial loans under the new regulations. See
id. The notice of proposed rulemaking
“emphasize[d] that a credit union's non-member
commercial loans or participation interests in non-member
commercial loans made by another lender continue to be
excluded from the [member business loan] definition and are
not counted . . . in calculating the statutory aggregate
March of 2016, Defendant issued a final rule adopting its
earlier proposal. 81 Fed. Reg. 13, 530 (Mar. 14, 2016). The
agency responded to public comments criticizing its approach
to loan participations, “emphasiz[ing] that [it]s
current approach with respect to [member business] loan
participations has been unchanged since 2003, ” and
stating that, “[a]fter careful consideration of the
public comments on this issue, the Board continues to
subscribe to the views articulated in 2003 and has determined
to adopt the proposed approach without change.” 81 Fed.
Reg. at 13, 548-49. Accordingly, for purposes of the present
suit, the only relevant change wrought by the 2016 Rule was
the elimination of the permission-to-purchase requirement.
See id. at 13, 549. The relevant portions of the
2016 Rule took effect on January 1, 2017.
September 7, 2016, Plaintiff filed the instant challenge to
the 2016 Rule under the APA. Plaintiff contends that
Defendant acted unlawfully in interpreting 12 U.S.C §
1757a to exclude interests in nonmember business loans
acquired by credit unions from the statutory cap on member
business loans. See Compl. [Dkt. 1] ¶ 90. On
November 2, 2016, Defendant filed the instant Motion to
Dismiss [Dkt. 18] pursuant to Federal Rules of Civil
Procedure 12(b)(1) and 12(b)(6).
motion filed pursuant to Rule 12(b)(1) challenges the
Court's subject matter jurisdiction over the pending
action. The burden of proving subject matter jurisdiction
falls on the plaintiff. McNutt v. General Motors
Acceptance Corp., 298 U.S. 178, 189 (1936); Adams v.
Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). Where, as
here, “a Rule 12(b)(1) motion challenge is raised to
the factual basis for subject matter jurisdiction . . . the
district court is to regard the pleadings' allegations as
mere evidence on the issue, and may consider evidence outside
the pleadings without converting the proceeding to one for
summary judgment.” Richmond, Fredericksburg &
Potomac R. Co. v. United States, 945 F.2d 765, 768 (4th
purpose of a Rule 12(b)(6) motion is to test the sufficiency
of a complaint; importantly, [a Rule 12(b)(6) motion] does
not resolve contests surrounding the facts, the merits of a
claim, or the applicability of defenses.” Edwards
v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir.
1999) (citation omitted). While the Court must accept
well-pled allegations of fact as true when ruling on a Rule
12(b)(6) motion, the Court need not accept legal conclusions
disguised as factual allegations. Ashcroft v. Iqbal,
556 U.S. 662, 679-81 (2009). Moreover, “[l]aws -
including statutes and formal rules and regulations - are
subject to judicial notice because they are matters of public
record and common knowledge.” Ebersole v.
Kline-Perry, No. 1:12-cv-26, 2012 WL 2673150, at *3
(E.D. Va. July 5, 2012).
Court begins its analysis with Plaintiff's Complaint.
Curiously, the Complaint makes little mention of the
regulatory changes wrought by the 2016 Rule. Indeed,
Plaintiff dedicates only seven of the Complaint's 90
paragraphs to the Rule Plaintiff ostensibly challenges.
Instead, Plaintiff's Complaint is almost entirely
addressed to Defendant's 2003 Rule. The relief
Plaintiff requests is directed solely at overturning changes
in Defendant's regulations traceable to the 2003 Rule, to
wit, the agency's determination that “purchases of
nonmember loans and participation interests . . . do not
involve the provision of member loan services, and the
acquired loan assets are not [member business loans].”
68 Fed. Reg. at 56, 544; see also Compl. [Dkt. 1]
¶ 90. Plaintiff does not attack the elimination
of the permission-to-purchase requirement in and of itself.
significant because a six-year statute of limitations applies
to lawsuits brought under the APA. See 28 U.S.C.
§ 2401(a); Jersey Heights Neighborhood Ass'n v.
Glendening, 174 F.3d 180, 186 (4th Cir. 1999). Any
challenge to the 2003 Rule should therefore have been filed -
at the latest - by October 1, 2009, six years after Defendant
published its 2003 Rule. Plaintiff's suit would, under
normal circumstances, be time-barred to the extent it
challenges Defendant's ...