FOM Litigation Not Over Yet

October 9, 2019 at 9:36 am Leave a comment

Even as the NCUA starts to approve charter expansions based on its recently upheld field of membership regulations, a motion filed with the Court of Appeals for the D.C. Circuit is a reminder that the litigation is not yet over.

Early last week, the American Bankers Association filed a petition requesting that the court reconsider its ruling that the NCUA acted within its regulatory and statutory authority when expanding the definition of a “well-defined local community” to give credit unions greater flexibility to expand their community charters. The rule also amends the definition of a “rural district” by increasing the population limit from 250,000 (or 3 percent of total state population) to 1 million people.

I read the motion last evening, and as much as I love baseball, it actually was more entertaining that the Yankees series against the Minnesota Twins, but I digress. The typical federal appeals case is decided by three judges who belong to the same circuit. A petition for an En Banc review is a request for an entire circuit court to reconsider an earlier ruling. To successfully be granted a rehearing, the moving party, in this case the ABA, would have to prove not only that the three judge panel came up with the wrong decision, but that it also misapplied settled law in a way that must be corrected. The motion is a longshot, but it is not unheard of. It was a successful En Banc petition which led the D.C. Circuit to reverse an earlier ruling that the CFPB’s governing structure was unconstitutional.

Not surprisingly, the motion zeros in on the issue which is central to this case: how much discretion does the NCUA have to define what constitutes a local community? In making its ruling, the court concluded that since Congress had delegated the authority to NCUA to define these terms, it gave NCUA “vast discretion.” In addition, the court held that the regulations should not be struck down based on the fact that NCUA may approve overly expansive community charters in the future. The only issue before the court was whether the framework established by the agency was illegal. According to the ABA, the court’s analysis is all wrong.

Let’s remember that this case has potential significance for industries other than credit unions. In the past, I have talked about a legal framework called Chevron deference, under which courts will generally defer to agency interpretations with expertise on the issue at hand when a statute’s language is vague or unclear. The conservative wing of the Supreme Court, most notably Justice Gorsuch, has signaled that it believes that judicial deference to agency interpretations has gone too far. As a result, you can bet that even if the case is not taken up again by the court of appeals, the Bankers will be petitioning the court, arguing that they can use this decision as a vehicle to chip away at this line of cases…

More ADA Website News

Speaking of the Supreme Court, on Monday, it decided not to take up a case decided by the Ninth Circuit Court of Appeals on the West coast. Credit unions have been successful in arguing that disabled persons who do not qualify for membership in a credit union lack standing (i.e. the legal right) to sue credit unions, claiming that their websites violate the ADA because they don’t accommodate the needs of blind persons. None of these cases address the underlying issue of whether or not the ADA applies to websites in the first place. In Domino’s Pizza LLC v. Robles, the Court held that the ADA does apply to websites, at least where there is a nexus between the website and the physical location. In this case, you can order a pizza from your local Domino’s location using their website. That being said, if you know anything about good pizza you shouldn’t be doing that in the first place, but again I digress.

The case has no direct impact on credit unions, but I expect other circuit courts to have to grapple with the underlying issue and, who knows? Someday, maybe the Department of Justice can issue final regulations once and for all.

Entry filed under: Legal Watch, Regulatory, Technology. Tags: , , , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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