Fourth Corner Credit Union v. Federal Reserve Bank of Kansas City ( 2017 )

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS June 27, 2017
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
THE FOURTH CORNER CREDIT
UNION, a Colorado state-chartered credit
union,
Plaintiff - Appellant,
v. No. 16-1016
FEDERAL RESERVE BANK OF
KANSAS CITY,
Defendant - Appellee.
------------------------------
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM,
Amicus Curiae.
_________________________________
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:15-CV-01633-RBJ)
_________________________________
Mark A. Mason, The Mason Law Firm, P.A., Mount Pleasant, South Carolina (Gabrielle
Z. Lee, The Mason Law Firm, P.A. Mount Pleasant, South Carolina, with him on the
briefs), for Plaintiff-Appellant.
Scott S. Barker, Wheeler Trigg O’Donnell LLP, Denver, Colorado (N. Reid Neureiter
and Benjamin I. Kapnik, Wheeler Trigg O’Donnell LLP, Denver, Colorado, with him on
the brief), for Defendant-Appellee.
Scott G. Alvarez, General Counsel; Richard M. Ashton, Deputy General Counsel;
Katherine H. Wheatley, Associate General Counsel; Yvonne F. Mizusawa, Senior
Counsel, Board of Governors of the Federal Reserve System, Washington, D.C., filed an
amicus brief for Amici Curiae, the Board of Governors of the Federal Reserve System.
_________________________________
Before MATHESON, BACHARACH, and MORITZ, Circuit Judges.
_________________________________
PER CURIAM
In this appeal, we vacate the district court’s order and remand with instructions to
dismiss the amended complaint without prejudice. This disposition is addressed in three
opinions—one by each member of the panel. Judge Moritz would affirm the dismissal
with prejudice. Judge Matheson would vacate and remand with instructions to dismiss the
amended complaint without prejudice on prudential-ripeness grounds. Judge Bacharach
would reverse the dismissal of the amended complaint. By remanding with instructions to
dismiss the amended complaint without prejudice, our disposition effectuates the
judgment of the two panel members who would allow the Fourth Corner Credit Union to
proceed with its claims.
Finally, we deny the Federal Reserve Bank of Kansas City’s motion to strike the
Fourth Corner Credit Union’s reply-brief addenda.
_________________________________
MORITZ, Circuit Judge.
_________________________________
The Fourth Corner Credit Union applied for a master account from the Federal
Reserve Bank of Kansas City. The Reserve Bank denied the application, effectively
crippling the Credit Union’s business operations. The Credit Union sought an
injunction requiring the Reserve Bank to issue it a master account. The district court
2
dismissed the action, ruling that the Credit Union’s raison d’être—to provide banking
services to marijuana-related businesses—would violate the Controlled Substances
Act (CSA), 21 U.S.C. §§ 801-904. Because the district court correctly declined to
lend its equitable power to illegal activity, I would affirm the dismissal with
prejudice.1
BACKGROUND
In 2012, Colorado amended its constitution to legalize a wide array of
recreational marijuana activity. See COLO. CONST. art. XVIII, § 16. An industry of
marijuana growers and retailers sprang up to supply this new market, but they face a
significant obstacle: traditional banks are wary of serving marijuana-related
businesses (MRBs). Many MRBs thus operate solely in cash, a restriction that
“raise[s] significant public safety concerns for customers and employees” and
“make[s] it more difficult for the state and federal government to regulate and audit
[MRBs].” App. 215.
The Credit Union aims to fill this banking void. Its purpose, according to its
amended complaint, is to “provide much needed banking services to compliant,
licensed cannabis and hemp businesses” and to marijuana-legalization supporters. Id.
at 219. But there are many hurdles for a would-be depository institution to clear. The
relevant hurdle here is obtaining a master account. A master account is, put simply, a
bank account for banks. It gives depository institutions access to the Federal Reserve
1
For the reasons stated by Judge Bacharach in his separate opinion, I conclude
that this matter is ripe for resolution. See Op. of J. Bacharach, J., 28-38.
3
System’s services, including its electronic payments system. In the Credit Union’s
words, “Without such access, a depository institution is nothing more than a vault.”
Id. at 225.
The Credit Union applied to the Federal Reserve Bank of Kansas City for a
master account.2 The Reserve Bank denied the application by letter, citing a host of
concerns. In general, the Reserve Bank determined that the Credit Union simply
posed too great a risk to the Federal Reserve System—in large part because of its
“focus on serving [MRBs].”3 Id. at 78.
In response, the Credit Union filed this suit. It sought a declaratory judgment
that the Credit Union is entitled to a master account and an injunction requiring the
Reserve Bank to issue it one. The Credit Union asserted that the Reserve Bank is
required by statute to issue a master account to every applicant, citing 12 U.S.C.
§ 248a. The Reserve Bank moved to dismiss the complaint, arguing that (1) the
Reserve Bank retains statutory discretion to deny master-account applications; (2) the
district court couldn’t use its equitable power to facilitate illegal activity—namely,
violations of the CSA; and (3) the Credit Union’s Colorado charter is preempted and
void under the Supremacy Clause because it conflicts with the CSA. In apparent
2
The Credit Union has one alternate path to access the Reserve Bank’s
services: establishing a correspondent relationship with a financial institution that
already has a master account. But at oral argument in the district court, counsel for
the Credit Union asserted that it tried and failed to secure a correspondent
relationship.
3
Because the Credit Union quoted from the denial letter in its pleadings, and
the letter is central to its claim, this court may consider it when reviewing the
Reserve Bank’s motion to dismiss. See GFF Corp. v. Associated Wholesale Grocers,
130 F.3d 1381, 1384 (10th Cir. 1997).
4
response to the Reserve Bank’s illegality argument, the Credit Union amended its
complaint. In its amended complaint, the Credit Union repeatedly alleges that it will
serve MRBs only if it’s authorized to do so by law. The Credit Union then moved for
summary judgment on its claim, and the Reserve Bank renewed its motion to dismiss.
The district court granted the Reserve Bank’s motion to dismiss and denied the
Credit Union’s motion for summary judgment. The district court didn’t accept the
Credit Union’s allegations that it would follow the law. And based on the principle
that “courts cannot use equitable powers to issue an order that would facilitate
criminal activity,” App. 707, the district court concluded that it couldn’t grant the
Credit Union its requested injunction. The district court declined to reach the Reserve
Bank’s preemption and statutory discretion arguments.
The Credit Union filed a motion for reconsideration requesting, in part, that
the court decide the preemption and statutory discretion issues. The district court
denied that motion. The Credit Union appeals.
DISCUSSION
The Credit Union argues that the district court erred in dismissing its claim
based on the Reserve Bank’s illegality defense. This court reviews de novo the
district court’s grant of the Reserve Bank’s motion to dismiss, applying the same
standard as the district court. Doe v. City of Albuquerque, 667 F.3d 1111, 1118 (10th
Cir. 2012). Specifically, we accept the well-pleaded allegations of the complaint as
true and construe them in the light most favorable to the Credit Union. Id.
5
The Reserve Bank’s illegality defense is straightforward. It begins with the
principle—which the Credit Union doesn’t dispute—that a court won’t use its
equitable power to facilitate illegal conduct. See Warner Bros. Theatres, Inc. v.
Cooper Found., 189 F.2d 825, 829 (10th Cir. 1951) (holding that “[a] court of equity
should not permit” a party to “take advantage of an admittedly illegal arrangement”);
see also Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814
(1945) (holding that clean-hands doctrine “presupposes [a court of equity’s]
refusal . . . to be the ‘abetter of iniquity’” (quoting Bein v. Heath, 47 U.S. 228, 247
(1848))); Cartlidge v. Rainey, 168 F.2d 841, 845 (5th Cir. 1948) (“It is well settled
that equity will not lend its aid to the perpetration of criminal acts.”).
By its own allegations, the Credit Union would use the court’s equitable relief
to facilitate illegal activity. If given a master account, the Credit Union “intends to
provide banking services to compliant state licensed cannabis and hemp businesses.”
App. 204. But even if these businesses are “compliant” with Colorado law, their
conduct plainly violates the CSA. See 21 U.S.C. § 841(a)(1) (“[I]t shall be unlawful
for any person knowingly or intentionally . . . to manufacture, distribute, or dispense,
or possess with intent to manufacture, distribute, or dispense, a controlled
substance.”).4 By providing banking services to these businesses, the Credit Union
would—by its own admission—facilitate their illegal activity by giving them bank
access that they currently lack. See App. 218 (“None of these [MRBs] have
4
Marijuana is a controlled substance. 21 U.S.C. §§ 802(6), 812
(Schedule I)(c)(10).
6
meaningful and stable access to traditional banking services. . . . The majority of
MRBs are forced to operate in cash only, and to suffer the high cost of handling and
safeguarding this cash.”). And, critically, the Credit Union concedes that it won’t be
able to serve MRBs without the court’s equitable relief. See Aplt. Br. 5 (“Without a
master account[, the Credit Union] cannot function.”). A court-ordered master
account would thus serve as the linchpin for the Credit Union’s facilitation of illegal
conduct.
In response to the Reserve Bank’s illegality defense, the Credit Union argues
that the MRBs it proposes to serve aren’t violating federal law. Specifically, it asserts
that “[c]onduct in full compliance with a presumptively valid state medical or
recreational marijuana law is legal under state and federal law until the state law is
formally invalidated.” Aplt. Br. 54. But the Credit Union seemed to abandon this
position at oral argument, and for good reason: the CSA, by virtue of the Supremacy
Clause, is the law of the land. See U.S. CONST. art. VI, cl. 2. Conduct prohibited by
federal law is illegal, regardless of what Colorado law may permit. See Planned
Parenthood of Kan. & Mid-Mo. v. Moser, 747 F.3d 814, 823 (10th Cir. 2014)
(“[W]hen state or local law conflicts with federal law, federal law prevails.”). For the
same reason, I would decline the Credit Union’s request to decide whether the CSA
preempts Colorado law. Regardless of how we might resolve that issue, the MRBs’
conduct would remain federally illegal.5
5
I would further decline to consider the Credit Union’s argument that federal
marijuana law is void for vagueness. The Credit Union raises this argument for the
7
The Credit Union also argues that it may legally serve MRBs pursuant to
certain Executive Branch guidance documents. In 2014, then-Deputy Attorney
General James Cole issued a DOJ memorandum outlining that agency’s marijuana-
banking enforcement priorities. But while the Cole Memorandum suggested that the
DOJ may decline to prosecute banks that meet certain criteria, the Memorandum also
made clear that its guidance didn’t create a legal defense for violations of the CSA or
certain money-laundering statutes. See App. 488 (explaining that “[t]his
memorandum does not alter in any way the [DOJ’s] authority to enforce federal law,
including federal laws relating to marijuana, regardless of state law” and doesn’t
“provide[] a legal defense to a violation of federal law, including . . . violation of the
CSA, the money laundering and unlicensed money transmitter statutes, or the [Bank
Secrecy Act]”).
Likewise, the Treasury Department’s Financial Crimes Enforcement Network
(“FinCEN”), which is responsible for enforcing certain money-laundering statutes,
issued its own marijuana-related guidance concurrently with the Cole Memorandum.
The FinCEN Guidance purported to “clarif[y] how financial institutions can provide
services to marijuana-related businesses consistent with their [anti-money
first time on appeal and doesn’t argue for plain error review. See Richison v. Ernest
Grp., Inc., 634 F.3d 1123, 1130 (10th Cir. 2011) (“If a newly raised legal theory is
entitled to appellate review at all . . . it may form a basis for reversal only if the
appellant can satisfy the elements of the plain error standard of review.”). For the
same reason, I would decline to consider the Credit Union’s new argument that
Congress nullified the CSA by prohibiting the Department of Justice (DOJ) from
expending appropriated funds to prevent states from implementing their own medical
marijuana laws.
8
laundering] obligations.” App. 490. But this guidance, like the Cole Memorandum,
didn’t nullify the CSA or federal money-laundering statutes. See id. n.3 (noting that
certain conduct encompassed by the Cole Memorandum “may merit civil or criminal
enforcement of the CSA”). And the Credit Union doesn’t explain how Executive
Branch enforcement decisions could undermine substantive law. See Feinberg v.
Comm’r of Internal Revenue, 808 F.3d 813, 816 (10th Cir. 2015) (“[I]n our
constitutional order it’s Congress that passes the laws, Congress that saw fit to enact
21 U.S.C. § 841, and Congress that in § 841 made the distribution of marijuana a
federal crime.”).
Perhaps recognizing the gossamer-thin nature of its interpretation of federal
law, the Credit Union alternatively argues that it won’t serve MRBs unless doing so
is legal. Specifically, it argues that its amended complaint plausibly alleges that the
Credit Union intends to abide by federal law and that the district court erred in
declining to presume these allegations are true. See Order, App. 709 (referring to the
Credit Union’s inconsistent allegations a “sleight of hand”). I agree with the district
court: the Credit Union’s equivocations don’t allay my concern that the equitable
relief it seeks will facilitate illegal activity.
In its original complaint, the Credit Union left no doubt about its intent to
serve MRBs. Indeed, the dearth of banking services for MRBs is the Credit Union’s
founding purpose. And the Credit Union amended its complaint to suggest otherwise
only after the Reserve Bank raised its illegality defense. Of course, this court looks
only to the operative complaint to assess whether the Credit Union’s allegations are
9
plausible. But that background sheds light on the amended complaint’s series of
seemingly inconsistent allegations. On one hand, the Credit Union repeatedly asserts
its intent to serve MRBs—an illegal course of conduct. On the other hand, the Credit
Union insists that it will follow the law:
- “Consistent with its state credit union charter, and in strict accordance with
state and federal laws, regulations and guidance, [the Credit Union] intends
to provide banking services to compliant state licensed cannabis and hemp
businesses, their employees, [and] industry vendors.” App. 204.6
- “In March 2014, [the Credit Union’s founders] came together to organize a
Colorado state-chartered credit union . . . and thereby provide much needed
banking services to compliant, licensed cannabis and hemp businesses . . . .
The plan to serve the MRB segment of its prospective field of membership
would only be executed if authorized by state and federal law.” Id. at 219.
- “When [the Credit Union] is granted access to the Federal Reserve
payments system it will have the ability to compete . . . for the business of
a newly emerging fast-growing industry. [The Credit Union] only intends
to serve the potential MRB segment of its membership if authorized by
state and federal law.” Id. at 237.
- “[Large commercial] banks currently deposit a substantial amount of state
legal cannabis money into the Federal Reserve payments system. [The
Credit Union] is a putative competitor that also seeks to provide services to
MRBs.” Id.
The Credit Union asserts that its promises to follow the law are plausible. And
this court presumes that the amended complaint’s well-pleaded factual allegations are
true and construes them in the light most favorable to the Credit Union. Doe, 667
F.3d at 1118. That principle might benefit the Credit Union if it unequivocally
6
The language added to the original complaint is underlined.
10
alleged that it won’t serve MRBs. But it never does.7 Instead, the amended
complaint’s allegations are all conditional: if serving MRBs is illegal, then the Credit
Union won’t serve them. We don’t owe the presumption of truth to illusory
allegations. Cf. Kan. Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1214 (10th Cir.
2011) (explaining that “in ruling on a motion to dismiss, a court should disregard all
conclusory statements of law and consider . . . the remaining specific factual
allegations”) (emphasis added). The Credit Union will either serve MRBs or it
won’t—its allegations can’t depend on the answer to a legal question. As one court
explained, “There is a significant difference between pleading alternative theories of
law based upon given facts and pleading alternative statements of fact to support a
given principle of law.” United States v. Gotti, 771 F. Supp. 535, 540 (E.D.N.Y.
1991).
The Credit Union’s promise to follow the law is particularly unworthy of
credence because the amended complaint both asserts that the Credit Union plans to
serve MRBs “in strict accordance with state and federal laws, regulations and
guidance,” App. 204, while at the same time carefully avoiding any concessions
7
When pressed at argument in the district court regarding its inconsistent
positions, the Credit Union seemed to assert that it won’t serve MRBs until federal
marijuana law changes. App. 642-43 (“THE COURT: Are you going to serve them or
not? . . . [COUNSEL]: Not until we can get additional clarification . . . in regards to
this issue.”). But when reviewing a motion to dismiss, our analysis is necessarily
limited to the pleadings.
11
regarding what the law actually is, see, e.g., App. 240 (“Whatever the law is, [the
Credit Union] will obey.”).8
After setting aside the Credit Union’s non-committal, conclusory allegations,
the amended complaint tells a clear story. The Credit Union “intends to provide
banking services to compliant state licensed cannabis and hemp businesses, their
employees, [and] industry vendors.” Id. at 204. The district court correctly declined
to facilitate this illegality.
In his separate opinion, Judge Bacharach suggests that the Credit Union, by
seeking a declaratory judgment, implicitly promised to “abide by the [district court’s]
ruling” regarding the legality of serving MRBs. Opinion of Bacharach, J., 7. But the
Credit Union never asked the district court to declare whether its plan to serve MRBs
is legal. Instead, it sought a declaration regarding its supposed entitlement to a master
account under 12 U.S.C. § 248a. See App. 50-51 (“[The Credit Union] respectfully
requests this Court issue a judgment declaring that [the Reserve Bank] must grant
[the Credit Union] a master account . . . pursuant to 12 U.S.C. §248a(c)(2).”). The
district court took up the illegality issue only when the Reserve Bank raised it as an
affirmative defense. And when the Credit Union amended its complaint in response,
not even that pleading sought a declaration that serving MRBs is legal. In dismissing
8
Judge Bacharach’s separate opinion correctly notes that the Credit Union’s
“stated intent to obey federal law” is a “factual allegation” that the district court
should have “accept[ed] as true.” Op. of J. Bacharach at 6. But as I’ve discussed, the
Credit Union’s own allegations suggest that “obey[ing] federal law” and “servicing
marijuana-related businesses” aren’t mutually exclusive. Id. So the Credit Union’s
promise to do the former reveals nothing about its intent to refrain from the latter.
12
the amended complaint, the district court answered a question that the Credit Union
never asked.
The Credit Union’s final argument is that the Reserve Bank failed to put forth
evidence supporting the illegality defense. But as I’ve discussed, the Credit Union’s
own allegations establish the defense, and the district court properly granted the
Reserve Bank’s motion to dismiss on that basis. See Miller v. Shell Oil Co., 345 F.2d
891, 893 (10th Cir. 1965) (“If the defense appears plainly on the face of the
complaint itself, the motion may be disposed of under [Rule 12(b)(6)].”).
Because I would affirm the district court’s dismissal based on the illegality
defense, I would not decide whether the Credit Union is entitled to a master account
under 12 U.S.C. § 248a or whether federal law preempts the Credit Union’s Colorado
charter. And because the motion to dismiss disposes of the case, I would not address
the Credit Union’s argument that the district court erred in denying the Credit
Union’s motion for summary judgment.
Accordingly, I would affirm the district court’s dismissal of the amended
complaint with prejudice.
13
16-1016, The Fourth Corner Credit Union v. Federal Reserve Bank of Kansas City
MATHESON, Circuit Judge.
We should dismiss this case on ripeness grounds.
A. The Credit Union’s New Claim
The Credit Union was formed primarily to serve MRBs. It requested a master
account from the Reserve Bank to do so. The Reserve Bank denied the Credit Union’s
application for a master account, citing the Credit Union’s “focus on serving marijuana-
related businesses.” Aplt. App. at 485. The Credit Union sued. The Reserve Bank again
expressed its misgiving about the Credit Union’s plan to serve MRBs in a motion to
dismiss the original complaint.
The Credit Union did not re-apply for a master account to alleviate the Reserve
Bank’s concern about MRBs, but instead just amended its complaint to allege it will
serve MRBs only if doing so is legal.
Assuming this allegation is true, as we must, it raises ripeness concerns because
this case has become divorced from the factual backdrop that gave rise to the original
dispute. As the Reserve Bank points out, the new Credit Union—the Credit Union that
excludes MRBs from its membership until serving them becomes legal—is a
“fundamentally different[] entity” than the one the Reserve Bank turned down. Aplee.
Supp. Br. at 17.
B. Ripeness
“The ripeness doctrine aims to prevent courts from entangling themselves in
abstract disagreements by avoiding premature adjudication.” Awad v. Ziriax, 670 F.3d
1111, 1124 (10th Cir. 2012) (quotations omitted). “A claim is not ripe for adjudication if
it rests upon contingent future events that may not occur as anticipated, or indeed may not
occur at all.” Texas v. United States, 523 U.S. 296, 300 (1998) (quotations omitted).
Ripeness has roots “both in the jurisdictional requirement that Article III courts hear only
‘cases and controversies’ and in prudential considerations limiting our jurisdiction.” Alto
Eldorado P’ship v. Cty. of Santa Fe, 634 F.3d 1170, 1173 (10th Cir. 2011). “[E]ven in a
case raising only prudential concerns, the question of ripeness may be considered on a
court’s own motion.” Nat’l Park Hospitality Ass’n v. Dep’t. of Interior, 538 U.S. 803,
808 (2003).1
In assessing prudential ripeness, this court has taken guidance from Abbott
Laboratories v. Gardner, 387 U.S. 136 (1967), abrogated on other grounds by Califano
v. Sanders, 430 U.S. 99 (1977), which “instructs courts to assess ‘both the fitness of the
issues for judicial decision and the hardship to the parties of withholding court
1
The Supreme Court’s recognition of the prudential ripeness doctrine goes back
many years. See, e.g., Reno v. Catholic Soc. Servs., Inc., 509 U.S. 43, 57 n.18 (1993)
(“Even when a ripeness question in a particular case is prudential, we may raise it on our
own motion, and ‘cannot be bound by the wishes of the parties.’” (quoting Reg’l Rail
Reorganization Act Cases, 419 U.S. 102, 138 (1974))). Recently, however, the Supreme
Court has identified “some tension” between its prudential justiciability doctrines and
“the principle that a federal court’s obligation to hear and decide cases within its
jurisdiction is virtually unflagging.” Susan B. Anthony List v. Driehaus, 134 S. Ct. 2334,
2347 (2014) (quotations omitted). The Court chose not to resolve that tension, see id.
(“[W]e need not resolve the continuing vitality of the prudential ripeness doctrine in this
case . . . .”), and we have continued to apply the doctrine, see United States v. Supreme
Court of N.M., 839 F.3d 888, 903-04 (10th Cir. 2016) (considering prudential ripeness
argument), petition for cert. filed, No. 16-1323 (U.S. May 1, 2017).
-2-
consideration.’” United States v. White, 244 F.3d 1199, 1202 (10th Cir. 2001) (quoting
Abbott Labs., 387 U.S. at 149).
1. Fitness
“First, on fitness, we focus on whether determination of the merits turns upon
strictly legal issues or requires facts that may not yet be sufficiently developed.” Awad,
670 F.3d at 1124 (alterations and quotations omitted).
The Credit Union’s amended complaint reveals this case is no longer based on
sufficiently developed facts.2 In particular, the amended complaint does not and cannot
tell us whether the Reserve Bank would grant a master account on the condition that the
Credit Union will not serve MRBs unless doing so is legal. It cannot do so because, as
the Credit Union explained to the district court, it has never approached the Reserve Bank
about obtaining a master account on the terms now alleged.
The Reserve Bank, in response to our call for supplemental briefing on ripeness,
contends the Credit Union’s position that it will serve MRBs only if legal is merely an
assertion made “in its briefs and during oral argument.” Aplee. Supp. Br. at 2. But that
2
The ripeness problem here is not the product of a pleading defect. It stems from
a lack of developed facts—the Credit Union has not asked the Reserve Bank for a master
account conditioned on its not serving MRBs unless legal, and, having not been asked,
the Reserve Bank has not and could not have denied such an application. Judge
Bacharach argues we can decide whether the allegations in the amended complaint are
sufficient to state a claim, see Op. of Judge Bacharach at 30-32, but even on the face of
the amended complaint, the dispute is hypothetical. And, as explained below, a court’s
ability to decide a legal question is not the full measure of fitness.
-3-
characterization is incorrect because it ignores that the Credit Union made this claim in
its amended complaint.3
If the Credit Union were to apply again based on its new “only if legal” position,
the Reserve Bank may issue a master account, in which case there would be no dispute
and a decision here would be only advisory. Or it might reject a master account for some
other reason, in which case there may be a dispute, though different from the one that
prompted this litigation. We cannot know what the facts would be, making this case
premature.4
Accepting the amended complaint’s factual allegations as true does not obviate the
ripeness problem. The sufficiency of the Credit Union’s amended complaint presents a
legal question, but it does not automatically follow that the case is fit to decide. Indeed,
3
The Credit Union alleged in its amended complaint that “[t]he plan to serve the
MRB segment of its prospective field of membership would only be executed if
authorized by state and federal law.” Aplt. App. at 97; see also id. at 97-98, 101, 103,
116 (making similar allegations). And, as my colleagues’ opinions also note, this was far
from a passing reference. See Op. of Judge Moritz at 10 (illustrating changes in amended
complaint); Op. of Judge Bacharach at 4-5 (similar).
At a hearing, the district court asked the Credit Union’s counsel, “[H]ave you
considered talking with counsel for the Federal Reserve Bank of Kansas City and saying
to them, hey, guys, if we commit that we won’t serve any MRBs, at all, unless and until
Congress acts, will you give us a master account, have you considered asking?” Aplt.
App. at 646-47. The Credit Union answered, “No, Your Honor.” Id. at 647. Although
this exchange illustrates the ripeness problem in this case, the problem stems not from
representations of counsel but rather from the Credit Union’s amended complaint itself
and its “only if legal” allegations.
4
Judge Bacharach criticizes this ripeness concern as “stem[ming] from one
allegedly missing piece of information,” namely, what the Reserve Bank would do with
an application from the Credit Union that promised to exclude MRBs unless serving them
is legal. Op. of Judge Bacharach at 32. This is a critical piece of information. And it is
not allegedly missing; it is missing.
-4-
we have found claims, and sometimes entire cases, unripe at the motion-to-dismiss stage.
See, e.g., S. Utah Wilderness Alliance v. Palma, 707 F.3d 1143, 1157-61 (10th Cir. 2013)
(dismissing case); Salt Lake Tribune Publ’g Co., LLC v. Mgmt. Planning, Inc., 454 F.3d
1128, 1140-41 (10th Cir. 2006) (dismissing claim); see also 5B C. Wright & A. Miller,
Federal Practice and Procedure: Civil § 1350 n.11 and accompanying text (3d ed., Apr.
2017 update) (discussing adjudication of ripeness issues at the pleading stage through a
motion to dismiss under Rule 12(b)(1)).5 Just because resolution of a legal question is
possible, and may even be straightforward, does not mean it is ripe to decide. As the
First Circuit has explained:
The notion that disputes which turn on purely legal questions are always
ripe for judicial review is a myth. . . . Put bluntly, the question of fitness
does not pivot solely on whether a court is capable of resolving a claim
intelligently, but also involves an assessment of whether it is appropriate
for the court to undertake the task. Federal courts cannot—and should
not—spend their scarce resources in what amounts to shadow boxing.
Thus, if a plaintiff’s claim, though predominantly legal in character,
depends upon future events that may never come to pass, or that may not
occur in the form forecasted, then the claim is unripe.
5
Judge Bacharach attempts to distinguish these cases. See Op. of Judge
Bacharach at 31-32 n.14. But in both cases, this court approved dismissals based on
ripeness at the pleading stage. In Palma, for the first time on appeal, this court relied on
ripeness to dismiss, see 707 F.3d at 1157-61, just as I am suggesting here. In Salt Lake
Tribune, we affirmed a Rule 12(b)(6) dismissal of a claim based on ripeness. See 454
F.3d at 1133, 1140-41. Although dismissals based on jurisdiction are technically Rule
12(b)(1) rulings, a federal court’s ripeness inquiry does not turn on what rule the
defendant cited in the motion to dismiss in district court, or even on whether a motion
was filed. When the alleged facts show an actual dispute has not yet occurred, a federal
court, including a circuit court, can and should consider whether the case—including
whether the complaint is legally sufficient—is ripe.
-5-
Ernst & Young v. Depositors Econ. Prot. Corp., 45 F.3d 530, 537 (1st Cir. 1995)
(citations omitted).
A principal difference between Judge Bacharach’s opinion and the conclusion
reached here is the level of confidence in predicting what would happen if the Credit
Union were to ask the Reserve Bank for a master account based on a commitment to
serve MRBs only if legal. He thinks the Reserve Bank would almost certainly deny the
application and thus concludes there is no ripeness issue. See Op. of Judge Bacharach at
32-35. I am much less certain what would happen.
The Credit Union’s plan to serve MRBs was a key reason why the Reserve Bank
denied the master account application. With that justification gone, we do not know what
would happen under the Credit Union’s revised stance. The Reserve Bank’s letter to the
Credit Union explained it was denying a master account based on the Credit Union’s
planned MRB service and “[o]ther factors” “[t]aken together.” Aplt. App. at 485.6 The
other factors included: (1) “the nature of [the Credit Union’s] proposed business model”;
(2) lack of capital; (3) failure to obtain insurance; and (4) its status as a “de novo
depository institution.” Id.
6
This court may rely on the Reserve Bank’s letter because the Credit Union’s
amended complaint refers to it. See Aplt. App. at 115 (discussing denial letter); see also
Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 (10th Cir. 2002) (explaining that a
court considering a motion to dismiss “may consider documents referred to in the
complaint if the documents are central to the plaintiff’s claim and the parties do not
dispute the documents’ authenticity”); GFF Corp. v. Associated Wholesale Grocers, Inc.,
130 F.3d 1381, 1384-85 (10th Cir. 1997).
-6-
These other factors do not mitigate the ripeness concern that the amended
complaint has spawned. First, the Reserve Bank based its master account denial on these
“[o]ther factors” “[t]aken together” with the MRB concern, suggesting its reasons
collectively formed the basis for the denial. Id. In other words, the denial letter did not
say whether any reason, standing alone, would have been enough to deny the master
account. Second, the Reserve Bank identified some of these other concerns as
intertwined with the Credit Union’s planned service of MRBs. For example, the denial
letter tied the “de novo” justification to the MRBs. See id. (explaining the de novo issue
was “of particular concern given [the Credit Union’s] focus on serving marijuana-related
businesses”).7 Third, although the Reserve Bank’s lawyer told the district court he
7
In its supplemental brief, the Reserve Bank again ties several of its reasons for
denying the master account to its concerns about the Credit Union’s serving MRBs. It
refers generally to the “inherent risks associated with providing [the Credit Union] a
master account” and to “the nature of [the Credit Union’s] proposed business model,
which focuses on a newly licensed industry with relatively immature businesses
operating in an environment of evolving laws and regulations.” Aplee. Supp. Br. at 5.
More specifically, it lists:
 The Credit Union’s “ability to . . . comply with applicable laws”—an issue “of
particular concern given [its] focus on serving marijuana-related businesses”; and
 The National Credit Union Administration’s concern that the Credit Union “had
not demonstrated its ability to conduct appropriate enhanced monitoring
requirements and manage its risk appropriately with respect to its customers with
marijuana-related businesses.”
Id. It makes sense that many of the Reserve Bank’s reasons tie back to the MRB
concern. For instance, by not serving MRBs, the Credit Union may find it easier to
obtain insurance, and, with insurance, may find it easier to attract capital. Thus, the new
plan described in the Credit Union’s amended complaint may cause many of its problems
Continued . . .
-7-
“seriously doubt[ed]” a promise from the Credit Union not to serve MRBs would make a
difference, id. at 656, this was an inconclusive prediction. As discussed below, the
Reserve Bank identifies many unanswered questions in its supplemental brief about an
MRB-free Credit Union, suggesting the possibility of a different outcome.
Despite its new position that it will serve MRBs only if legal, the Credit Union
argues that submitting another master account application would be futile. This ignores
why the Reserve Bank denied the first application. The Credit Union’s business plan was
not part of its master account application, but the Credit Union’s planned service of
MRBs was part of the reasoning for the Reserve Bank’s denial. The Credit Union has not
sought a master account on the new condition that it will not serve MRBs unless legal,
and its revised litigation position does not substitute for a new application to the Reserve
Bank. The Credit Union has filed two complaints contemplating two very different
financial entities, but it has submitted only one master account application. As the
Reserve Bank points out, an MRB-free “application would raise numerous questions that
have yet to be asked, much less answered.” Aplee. Supp. Br. at 17.8 Given the change in
to fall away. This may not be the case, but we do not now know what remaining hurdles,
if any, might stand between the Credit Union and a master account.
8
As explained in the Reserve Bank’s supplemental brief, these questions include:
 Would [the Credit Union] be able to obtain deposit insurance with a
non-marijuana business plan?
 Would [the Credit Union’s] revised business plan need to be
approved by the State of Colorado and, if so, would it be approved?
Continued . . .
-8-
circumstances, submitting another application would hardly be an empty gesture. And
even if the result is another denial, it would at least make the factual scenario created by
the amended complaint real rather than hypothetical.
In short, we do not know what would happen if the Credit Union were to seek a
master account based on the new plan alleged in its amended complaint. As the Reserve
Bank discerns, the Credit Union is attempting “to retroactively alter the nature of the
dispute.” Id. at 2. The issues the Credit Union raises are not yet fit for judicial decision.
2. Hardship
 As a de novo institution with no historical track record of operations,
could [the Credit Union] demonstrate that it can operate safely and
soundly and that it has appropriate compliance procedures,
particularly for Bank Secrecy Act and Anti-Money Laundering
responsibilities?
 How would [the Credit Union] satisfy the [Reserve Bank’s] concern
that it will lack capital at inception?
 Could [the Credit Union] establish a correspondent relationship with
a bank with a pre-existing master account?
 Would [the Credit Union’s] charter or field of membership be
subject to review or revocation if it were prohibited from executing
an important part of the business plan, and the economic
assumptions on which the charter was issued were materially
different?
 Given the focus of [the Credit Union’s] prior business plan on
serving MRBs, would [the Reserve Bank] have to examine [the
Credit Union’s] operations to ensure that it limited its business as
stated in its new business plan?
Id. at 17-18 (bullets added).
-9-
In the second part of our ripeness analysis, we assess the potential “hardship from
withholding judicial review” by asking “whether the challenged action creates a direct
and immediate dilemma for the parties.” Awad, 670 F.3d at 1125 (quotations omitted).
The Reserve Bank faces no hardship. As for the Credit Union, the challenged action is
the Reserve Bank’s denial of a master account, which the Credit Union argues should
have issued within days of its initial request. Without a master account, the Credit Union
contends, it cannot conduct its affairs. The Credit Union’s supplemental briefing also
alludes to an unspecified “irremediable adverse consequence that would flow from
requiring a later challenge,” Aplt. Supp. Br. at 13, but it provides no particulars on how a
dismissal on ripeness grounds would alter the status quo. See Los Alamos Study Grp. v.
U.S. Dep’t of Energy, 692 F.3d 1057, 1064 (10th Cir. 2012) (explaining the plaintiff
bears the burden of showing ripeness).
The Credit Union’s continued inability to conduct legal business is a hardship, but
the scope of the hardship is far from clear. If a dismissal based on ripeness can be said to
put the Credit Union in a direct or immediate dilemma, it can do what it never bothered to
try—including while this case was pending—and ask the Reserve Bank for a master
account now that it does not plan to serve MRBs so long as doing so is illegal. Indeed,
this course, rather than continuing with this litigation, may be the Credit Union’s most
efficient pathway to obtaining a master account.
Judge Bacharach notes that “months may pass” before the Reserve Bank acts on
any reapplication. Op. of Judge Bacharach at 38. But just as we do not know whether
the Reserve Bank would grant a master account to an MRB-free Credit Union, we do not
- 10 -
know how long the Reserve Bank might need to process such a request. He points out
the Reserve Bank took approximately nine months to act on the Credit Union’s first
application, see id., but that history may not be a good guide to the future. The original
delay was more than likely based on concern over the Credit Union’s plan to serve
MRBs. Without that complication, and with the benefit of the detailed knowledge it has
garnered about the Credit Union, the Reserve Bank may find disposition of a new
application relatively straightforward. The Credit Union asserts that processing normally
takes just five to seven business days.
The ripeness problem here traces back to the Credit Union’s decision to amend its
complaint. Under the circumstances discussed here, the Credit Union’s potential
hardship does not overcome the fitness concerns outlined above. See Nat’l Park
Hospitality Ass’n, 538 U.S. at 814-15 (Stevens, J., concurring in the judgment)
(explaining fitness “is the more important” inquiry and that hardship is “less
important”).9
9
This court’s disposition effectively lessens any hardship for the Credit Union.
The Credit Union entered this litigation apparently unsure about the legality of serving
MRBs (as was still evident from the uncertainty built into its amended complaint’s “only
if legal” allegation). Judge Bacharach, relying on his opinion and the opinion of Judge
Moritz, stitches together a panel holding “that servicing marijuana-related businesses
remains illegal under federal law.” Op. of Judge Bacharach at 37. With the benefit of
that holding, the Credit Union “will know that servicing [MRBs] is illegal” and can now
choose whether to pursue a master account for an MRB-free field of membership. Id.
Maybe it will, and maybe, if it does, the Reserve Bank will issue a master account.
- 11 -
C. Conclusion
As the Reserve Bank observes, the Credit Union “is apparently seeking court
review of a decision that [the Reserve Bank] has never made and that the district court
never considered.” Aplee. Supp. Br. at 16. I would dismiss this appeal as premature and
remand to the district court to vacate the judgment and dismiss without prejudice.
- 12 -
The Fourth Corner Credit Union v. Federal Reserve Bank of Kansas City,
No. 16-1016.
BACHARACH, J.
This case involves the denial of a request for a master account. A
master account is required to purchase services that are indispensable for
all financial institutions. 1 Without a master account, a financial institution
must obtain these services through another institution serving as a
“middleman.” To avoid the middleman, a financial institution must obtain
a master account from one of the regional Federal Reserve Banks.
The plaintiff, The Fourth Corner Credit Union, is a credit union that
requested a master account from one of the regional Federal Reserve Banks
1
The Board of Governors of the Federal Reserve System explains:
The master account is both a record of financial transactions
that reflects the financial rights and obligations of an account
holder and the Reserve Bank with respect to each other, and the
place where opening and closing balances are determined. For
each institution, all credits and debits resulting from the use of
Federal Reserve services at any Federal Reserve office are
booked to this single master account at one Reserve Bank.
Bd. of Governors of the Fed. Reserve Sys., Reserve Maintenance Manual 5
(Nov. 2016), available at https://www.federalreserve.gov/monetarypolicy/
files/reserve-maintenance-manual.pdf.
This manual does not appear in the appellate record. But we may take
judicial notice of the manual and other materials on the Board of
Governors’ website. See New Mexico ex rel. Richardson v. Bureau of Land
Mgmt., 565 F.3d 683, 702 n.22 (10th Cir. 2009) (taking judicial notice of
materials on the websites of two federal agencies); see also Winzler v.
Toyota Motor Sales U.S.A., Inc., 681 F.3d 1208, 1213 (10th Cir. 2012)
(“The contents of an administrative agency’s publicly available files . . .
traditionally qualify for judicial notice . . . .”).
(the Federal Reserve Bank of Kansas City). This request would ordinarily
be considered routine for the Federal Reserve Bank of Kansas City. But the
Federal Reserve Bank of Kansas City learned from a third party that Fourth
Corner wanted to service marijuana-related businesses in a state that had
legalized these businesses. 2 The Federal Reserve Bank of Kansas City
refused to grant the master account, prompting Fourth Corner to sue for a
declaratory judgment and an injunction.
The Federal Reserve Bank of Kansas City moved to dismiss, arguing
in part that Fourth Corner would use the master account to violate federal
drug laws. The district court agreed and dismissed the amended complaint.
In my view, this ruling was erroneous for two reasons. First, the
district court should have presumed that Fourth Corner would follow the
law as determined by the court. Second, in the amended complaint, Fourth
2
In the amended complaint, Fourth Corner identified the documents
submitted to the Federal Reserve Bank of Kansas City for a master
account. These documents did not include the business plan or any other
document describing the type of business to be conducted. Apparently,
however, the Bank learned of the business plan from some other source. In
a letter, the Bank told Fourth Corner that a master account would be denied
for eight reasons, including Fourth Corner’s desire to service marijuana-
related businesses. See Part VI(C), below. Based on the allegations in the
amended complaint, this letter constituted the Bank’s first communication
to Fourth Corner about an unwillingness to issue a master account because
of Fourth Corner’s desire to service marijuana-related businesses. See GFF
Corp. v. Associated Wholesale Grocers, 130 F.3d 1381, 1384 (10th Cir.
1997) (stating that in considering a motion to dismiss for failure to state a
valid claim, the court can consider indisputably authentic copies of
documents referenced in the complaint and central to the plaintiff’s claim).
2
Corner promised to obey the law. By seeking a declaratory judgment,
Fourth Corner acknowledged that the court was the sole arbiter of the law.
Thus, the amended complaint indicates that Fourth Corner would obey a
ruling that servicing marijuana-related businesses is illegal. 3
I. Standard of Review
In this appeal, we engage in de novo review. Shimomura v. Carlson,
811 F.3d 349, 358 (10th Cir. 2015). This review requires us to determine
whether the amended complaint states a plausible claim for relief. Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009). In gauging the claim’s plausibility, we
credit all of the amended complaint’s well-pleaded factual allegations and
view them in the light most favorable to Fourth Corner. See Colby v.
Herrick, 849 F.3d 1273, 1279 (10th Cir. 2017).
II. The Amended Complaint and the District Court’s Dismissal
In the amended complaint, Fourth Corner stated that it would service
marijuana-related businesses only if authorized by federal law. Fourth
Corner argued that servicing these businesses had been legalized by recent
guidance from federal agencies. But in the amended complaint, Fourth
Corner promised that “[w]hatever the law is, [Fourth Corner] will obey.”
3
Fourth Corner also argues that its motion for summary judgment
should have been granted. Like my colleagues, I do not discuss the
summary-judgment ruling, for it became academic upon dismissal of the
amended complaint.
3
Appellant’s App’x at 240. Elsewhere in the amended complaint, Fourth
Corner committed to obey the law, stating:
[Fourth Corner’s charter] states [that Fourth Corner] is
“authorized to conduct business pursuant to all of the powers
conferred upon it by law, until this charter is suspended,
revoked or otherwise surrendered in the manner directed by
statute.” [Fourth Corner] takes this grant of authority to mean
it must comply with both state and federal law, and it intends
to do so.
Id. at 224-25. Four other allegations in the amended complaint reiterated
Fourth Corner’s intent to obey the law:
1. The plan to serve the [marijuana-related business]
segment of [Fourth Corner’s] prospective field of
membership would only be executed if authorized by state
and federal law.
Id. at 219.
2. The proposed credit union’s business plan was
straightforward – (i) build a Colorado state-chartered
credit union around a culture of compliance; . . . (iii) if
service of [marijuana-related businesses] is authorized by
state and federal law, charge credit union members that
required enhanced monitoring service fees commensurate
with the cost of the enhanced due diligence required by
[federal guidance from the United States Department of
the Treasury’s Financial Crimes Enforcement Network
and a memorandum from the Department of
Justice]; . . . and (vi) become a regulatory partner with
state and federal government to perform the “gatekeeper”
function as envisioned by [the Financial Crimes
Enforcement Network’s guidance] and the Bank Secrecy
Act . . . .
Id. at 219-20.
4
3. [Fourth Corner] only intends to serve the [marijuana-
related business] segment of its prospective field of
membership if authorized by law.
Id. at 222.
4. [Fourth Corner] only intends to serve the potential
[marijuana-related business] segment of its membership if
authorized by state and federal law.
Id. at 237.
Fourth Corner also explained that if servicing marijuana-related
businesses is illegal, Fourth Corner would confine its business to servicing
members of social groups supporting the legalization of marijuana. This
part of Fourth Corner’s business plan was legal, and no one has suggested
otherwise. But servicing marijuana-related businesses is different, and the
district court properly concluded that this part of Fourth Corner’s plan
would have violated federal drug laws.
Upon drawing this conclusion, the district court interpreted Fourth
Corner’s promise to obey the law. In the district court’s view, Fourth
Corner was promising to follow its own understanding of the law, not to
obey the district court’s pronouncement of the law. Interpreted this way,
the promise gave the district court little confidence that Fourth Corner
would obey federal drug laws, for Fourth Corner had argued that servicing
marijuana-related businesses was legal. Suspicious that Fourth Corner
would follow its own understanding of the law rather than the court’s, the
district court granted the motion to dismiss.
5
III. Error in Dismissing the Amended Complaint
This ruling was erroneous in two ways.
First, the district court improperly discounted Fourth Corner’s stated
intent to obey federal law. This allegation of intent constituted a factual
allegation. See, e.g., United States v. Hayes, 477 F.2d 868, 873 (10th Cir.
1973) (recognizing that “actual intent or state of mind” involves a factual
inquiry). And like any other factual allegation, this one should have been
interpreted favorably to Fourth Corner (as the non-movant). See Part I,
above.
At a bench trial, the district court could freely decide whether Fourth
Corner actually intended to obey federal law. See Mathis v. Huff & Puff
Trucking, Inc., 787 F.3d 1297, 1305 (10th Cir. 2015) (indicating that in a
bench trial, the district court “has the exclusive function of appraising
credibility” (internal quotation marks omitted)). But here the district court
evaluated the validity of Fourth Corner’s assertion at the motion-to-dismiss
stage. At this stage, the district court must accept as true all of Fourth
Corner’s well-pleaded factual allegations and view them in the light most
favorable to Fourth Corner. See Part I, above. The district court was not
free to scuttle these requirements.
Second, the district court should have presumed that Fourth Corner
would obey the ruling that servicing marijuana-related businesses is
illegal. See, e.g., Royal Coll. Shop, Inc. v. N. Ins. Co. of N.Y., 895 F.2d
6
670, 682-83 (10th Cir. 1990) (discussing the presumption that a person
obeys the law); NLRB v. Shawnee Indus., Inc., 333 F.2d 221, 225 (10th Cir.
1964) (“It is presumed that a person obeys the law and discharges the
obligations imposed on him by law.”). This presumption is especially
fitting here, where Fourth Corner acknowledged the court’s role as arbiter
of the law by the very act of asking for a declaratory judgment. 4 See Specht
v. Jensen, 853 F.2d 805, 807 (10th Cir. 1988) (“[I]t is axiomatic that the
judge is the sole arbiter of the law and its applicability.”). 5 But even
without this acknowledgment, the district court should have presumed that
Fourth Corner would abide by the ruling.
Nothing in the amended complaint overcame this presumption.
Indeed, as explained above, the amended complaint indicated that Fourth
Corner intended to obey the law. And by acknowledging the court’s role as
4
The proposed declaratory judgment involved the right to a master
account, not the legality of servicing marijuana-related businesses. But by
seeking a declaratory judgment, Fourth Corner acknowledged the court’s
role as arbiter of the law.
5
In my view, Fourth Corner unambiguously acknowledged the court’s
role as the arbiter of what was legal. But any lingering doubt would have
been dispelled at the hearing on the motion to dismiss. There Fourth
Corner expressly embraced the court’s status as arbiter of the law: “Your
Honor, . . . with every word you speak, you are the law. . . . I’m listening
to every word you say, and I’m looking to the Court for direction, to the
extent that the Court can provide it.” Appellant’s App’x at 643-44; accord
id. at 691-92 (indicating that Fourth Corner would obey the court’s
conclusion, articulated during the hearing, that federal guidance had not
authorized financial institutions to service marijuana-related businesses).
7
arbiter of the law, Fourth Corner’s promise to obey the law meant that
Fourth Corner would obey the court’s eventual pronouncement of the law.
Nonetheless, the district court interpreted Fourth Corner’s promise to
obey the law in a way that conflicted with the amended complaint as a
whole and Fourth Corner’s acknowledgment of the court as arbiter of the
law. As stated above, Fourth Corner effectively asserted that it intended to
obey the district court. Given this assertion, it makes little sense to
interpret Fourth Corner’s promise merely as a pledge to obey what Fourth
Corner already thought the law was. At this stage of the proceedings, the
only reasonable interpretation is that Fourth Corner promised to acquiesce
in the district court’s pronouncement of the law. 6
The district court’s contrary interpretation was erroneous because it
rested on misapplication of the standard on a motion to dismiss and
abandonment of the presumption that Fourth Corner would follow the law.
6
This interpretation is supported by Fourth Corner’s discussion at the
hearing on the motion to dismiss. The district court asked whether Fourth
Corner would stipulate to “an order that enjoins [Fourth Corner] from
serving [marijuana-related businesses] unless and until the Controlled
Substances Act is amended to permit marijuana possession.” Id. at 629-30.
Fourth Corner answered that it would stipulate to such an order. Id. On
appeal, Fourth Corner made essentially the same commitment at oral
argument.
8
IV. The Federal Reserve Bank of Kansas City’s Alternative
Arguments for Affirmance
The Federal Reserve Bank of Kansas City contends that we may
affirm the dismissal on two alternative grounds:
1. Fourth Corner lacks a statutory right to a master account.
2. Fourth Corner’s charter is preempted because it poses an
obstacle to Congress’s goals under the Controlled Substances
Act.
I would reject both arguments.
A. Fourth Corner’s Statutory Right to a Master Account
Fourth Corner argues that it is entitled to a master account under 12
U.S.C. § 248a(c)(2). The Federal Reserve Bank of Kansas City counters
that federal law does not entitle Fourth Corner to a master account. Though
Fourth Corner relies on § 248a(c)(2), the Federal Reserve Bank of Kansas
City contends that it obtained discretion under 12 U.S.C. § 342. According
to Federal Reserve Bank of Kansas City, § 342 creates discretion on
whether to issue a master account.
The district court properly rejected this argument, for § 248a(c)(2)
unambiguously entitles Fourth Corner to a master account. This
interpretation of § 248a(c)(2) is supported by (1) repeated interpretations
by the Board of Governors and regional Federal Reserve Banks, (2) the
legislative history, and (3) the longstanding interpretation of this statute by
other courts and academics.
9
1. The Meaning of § 248a(c)(2)
Fourth Corner argues that the right to a master account is
nondiscretionary under 12 U.S.C. § 248a(c)(2). This section was enacted as
part of the 1980 Deregulation and Monetary Control Act and states:
The schedule of fees prescribed pursuant to this section shall
be based on the following principles:
. . .
(2) All Federal Reserve bank services covered by the fee
schedule shall be available to nonmember depository
institutions and such services shall be priced at the same fee
schedule applicable to member banks . . . .
12 U.S.C. § 248a(c)(2) (2012). 7 In my view, this language unambiguously
entitles Fourth Corner to a master account.
a. The Statute’s Unambiguous Language
Interpretation of § 248a(c)(2) begins with its language. Hughes
Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999); United States v.
Handley, 678 F.3d 1185, 1189 (10th Cir. 2012). The statutory language
does two things: It ensures universal access to certain bank services and
provides uniform pricing for them.
The statute uses the term “shall,” which indicates a congressional
command. See Lopez v. Davis, 531 U.S. 230, 241 (2001) (“Congress used
‘shall’ to impose discretionless obligations . . . .”). Thus, the statute
7
The Federal Reserve System classifies financial institutions as either
member banks or nonmember depository institutions. Member banks own
shares of a Federal Reserve Bank and elect most members of the board of
directors. Nonmember depository institutions do not.
10
commands Federal Reserve Banks to make all services covered by “the fee
schedule” available to “nonmember depository institutions.” In this way,
the statute establishes open access to Federal Reserve services for
nonmember depository institutions. Fourth Corner is a nonmember
depository institution; thus, Fourth Corner is entitled to obtain the services
covered in the fee schedule.
The Federal Reserve Bank of Kansas City and the Federal Reserve
System’s Board of Governors, as amicus curiae, argue that the issuance of
master accounts is omitted from the fee schedule’s list of services. Fourth
Corner disagrees, invoking a catchall provision that requires Federal
Reserve Banks to provide nonmember depository institutions with access to
“any new services” offered through the Federal Reserve System. 12 U.S.C.
§ 248a(b)(8).
For the sake of argument, I assume that the issuance of master
accounts does not constitute a new service covered by this catchall
provision. Even with this assumption, § 248a(c)(2) would require the
issuance of master accounts, for all services offered by the Federal Reserve
System are conditioned on the issuance of master accounts. Op. of Judge
Moritz at 3-4; see also Fed. Res. Banks, Operating Circular No. 7, Book-
Entry Securities Account Maintenance and Transfer Services ¶¶ 3.19, 3.21,
& 5.2 (eff. June 30, 2016) (stating that each entity with a Federal Reserve
securities account must maintain a master account to send or receive
11
transfers with assignment of credit to the sender and debit to the receiver).
Without a master account, none of the fee schedule’s services would be
available. Thus, a nonmember depository institution like Fourth Corner can
operate only by obtaining its own master account or using a middleman
that has a master account.
Nonetheless, the Bank contends that it can deny a master account
because the issuance of master accounts is not specifically listed in the
services covered by § 248a(c)(2). This contention flies in the face of
Congress’s unambiguous command to make services in the fee schedule
available to nonmember depository institutions. See United States v.
Walker, 947 F.2d 1439, 1443-44 (10th Cir. 1991) (rejecting a construction
of a statute that “would allow a bank officer to circumvent [congressional]
intent”). I would reject this effort to subvert congressional intent.
The Federal Reserve Bank of Kansas City and the Board of
Governors protest that Fourth Corner’s interpretation reads a new word
into § 248a(c)(2): “all.” The statute does not say that Federal Reserve
services “shall be available to all nonmember depository institutions.”
Instead, the statute requires “all Federal Reserve bank services” to be made
available to “nonmember depository institutions.” 12 U.S.C. § 248a(c)(2).
Thus, the Federal Reserve Bank of Kansas City and the Board of Governors
reason, regional Federal Reserve Banks need not make their services
available to all nonmember depository institutions.
12
I disagree. In my view, the statute would have the same meaning
regardless of whether the word “all” preceded the phrase “nonmember
depository institutions.” In either case, regional Federal Reserve Banks
would be obligated to make the designated services available to all
nonmember depository institutions.
If the word “all” had been included, it would have served as an
indefinite adjective, modifying the phrase “nonmember depository
institutions.” See Bryan A. Garner, The Chicago Guide to Grammar,
Usage, and Punctuation 60 (2016) (defining indefinite adjectives); see also
United States v. Legg, 157 F.2d 990, 992 (4th Cir. 1946) (recognizing that
“all” can constitute an indefinite adjective); Clapp v. Heiner, 51 F.2d 224,
226 (3d Cir. 1931) (same); Lewis v. Moore, 80 Mass. 184, 185 (1859)
(same). Had “all” been included, the phrase “shall be available to all
nonmember depository institutions” could have meant “shall be available
to each and every nonmember depository institution.” See Webster’s Third
New International Dictionary 54 (Philip Babcock Gove ed., 1993)
(defining one adjectival form of “all”).
But even without the word “all,” the phrase “shall be available to
nonmember depository institutions” means “shall be available to each and
every nonmember depository institution.” Omitting “all” resulted in the
13
absence of a restrictive modifier 8 for the phrase “nonmember depository
institutions.” Without a restrictive modifier, the phrase “nonmember
depository institutions” is an inclusive term that includes all nonmember
depository institutions. See W. Minn. Mun. Power Agency v. Fed. Energy
Regulatory Comm'n, 806 F.3d 588, 592 (D.C. Cir. 2015) (concluding that
the terms “states” and “municipalities” include all states and municipalities
because of the absence of language qualifying or restricting the terms
“states” and “municipalities”); Gares v. Willingboro Twp., 90 F.3d 720,
726 (3d Cir. 1996) (interpreting the plain meaning of the noun phrase
“prevailing plaintiffs” to include all prevailing plaintiffs); Leininger v.
Pioneer Nat’l Latex, 875 N.E.2d 36, 43 (Ohio 2007) (interpreting the term
“Damages,” without a restrictive modifier, as “an inclusive term embracing
the panoply of legally recognized pecuniary relief” (internal quotation
marks omitted)).
In similar circumstances, drafters of statutes are often cautioned
against unnecessarily inserting the adjective “all” before a plural noun
(like “nonmember depository institutions”). See, e.g., 101 Pa. Code
§ 15.142(c) (stating that “it is almost never necessary to use” “indefinite
8
A restrictive modifier is a word in a noun phrase that restricts the
meaning of the noun. See William Frawley, Linguistic Semantics 79
(2013).
14
adjectives” such as “all” “[i]f the subject of the sentence is plural”). For
example, one drafting treatise states:
a. Use adjectives such as “each,” “every,” “any,” “all,”
“no,” and “some” (technically known as “pronominal
indefinite adjectives”) only when necessary.
b. If the subject of the sentence is plural, it is almost never
necessary to use this kind of adjective (e.g., Majors of the
Regular Army shall . . . . ; Majors of the Regular Army
may not . . . .).
William P. Statsky, Legislative Analysis and Drafting 184 (2d ed. 1984)
(emphasis added); see also Reed Dickerson, Legislative Drafting 81 (1954)
(same quotation with a different example of plural nouns). Similarly, a
scholar advises:
“All” is frequently used unnecessarily to give a spurious kind
of emphasis. Constructions may involve tireless
circumlocution. For example—
All those persons who are elected members of the Board
shall hold office for three years.
It is quite adequate to say—
Elected members of the Board shall hold office for three
years.
G.C. Thornton, Legislative Drafting 77 (1970); see also Lawrence E.
Filson & Sandra L. Strokoff, The Legislative Drafter’s Desk Reference
§ 22.10, at 297-98 (2d ed. 2008) (“The terms ‘any,’ ‘each,’ and ‘every’
should ideally be reserved for expressions that require unusual emphasis,
or for those cases where the use of ‘a’ or ‘an’ might permit the unintended
15
interpretation that the obligation is to be discharged (or the privilege
exhausted) by applying it to a single member of the class instead of to all
of them.”).
As these drafting treatises suggest, it was unnecessary to put “all”
before a plural noun like “nonmember depository institutions.” The
meaning was the same with or without the adjective “all.” Either way,
§ 248a(c)(2) unambiguously entitled all nonmember depository institutions
to a master account.
b. Past Interpretations by the Board of Governors
As noted above, the Board of Governors argues as amicus curiae that
§ 248a(c)(2) does not entitle all nonmember depository institutions to
Federal Reserve services. This position is new and unique for the Board.
Before this litigation, the Board of Governors had uniformly
interpreted the 1980 Deregulation and Monetary Control Act to extend
Federal Reserve services to all “depository institutions.” See, e.g.,
Policies: The Federal Reserve in the Payments System, Bd. of Governors of
the Fed. Reserve Sys. (1990), available at http://www.federalreserve.gov/
paymentsystems/pfs_frpaysys.htm (“Federal Reserve payment services are
available to all depository institutions . . . .”); Policies: Standards Related
to Priced-Service Activities of the Federal Reserve Banks, Bd. of
Governors of the Fed. Reserve Sys. (1984) (“The Monetary Control Act of
1980 . . . has expanded the Federal Reserve’s role by requiring the Federal
16
Reserve to provide its services to all depository institutions on an
equitable basis . . . .”), available at http://www.federalreserve.gov/
paymentsystems/pfs_standards.htm; Policies: Principles for the Pricing of
the Federal Reserve Bank Services, Bd. of Governors of the Fed. Reserve
Sys. (1980) (“Services covered by the fee schedule are available to all
depository institutions.”), available at http://www.federalreserve.gov/
paymentsystems/pfs_principles.htm.
Even now, the Board of Governors continues to announce on its
website that the 1980 Deregulation and Monetary Control Act gives “all
depository institutions access to the Federal Reserve’s payment services.”
Federal Reserve’s Key Policies for the Provision of Financial Services:
About, Bd. of Governors of the Fed. Reserve Sys., https://www.
federalreserve.gov/paymentsystems/pfs_about.htm (last updated Oct. 28,
2016) (emphasis added). Thus, the amicus brief in this case appears to be
the only time that the Board of Governors has doubted the right of every
nonmember depository institution to access the Federal Reserve’s
services—even though the adjectival “all” was omitted before the statutory
phrase “nonmember depository institutions.”
Ignoring its past pronouncements and current view expressed on its
own website, the Board of Governors argues that we should defer to its
litigation position here. I would not do so for two reasons.
17
First, § 248a(c)(2) is not ambiguous. The plain text of § 248a(c)(2)
indicates that nonmember depository institutions are entitled to purchase
services from Federal Reserve Banks. To purchase these services, a master
account is required. Thus, nonmember depository institutions, such as
Fourth Corner, are entitled to master accounts. See Part IV(A)(1)(a),
above. The Board of Governors’ current litigation position cannot trump
the plain meaning of the statute. See Chevron, U.S.A., Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837, 842-43 (1984) (“If the intent of Congress is
clear, that is the end of the matter; for the court, as well as the agency,
must give effect to the unambiguously expressed intent of Congress.”).
Second, this litigation position conflicts with the Board of
Governors’ longstanding interpretation of the statute. Indeed, even now the
Board of Governors continues to state on its webpage that federal law
gives all depository institutions access to the Federal Reserve’s payment
services. As a result, the Board’s current interpretation is “‘entitled to
considerably less deference’ than a consistently held agency view.”
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 515 (1994) (quoting
I.N.S. v. Cardoza-Fonseca, 480 U.S. 421, 446 n.30 (1987)); see also
William N. Eskridge, Jr., Philip P. Frickey & Elizabeth Garrett,
Legislation and Statutory Interpretation, 334 (2d ed. 2006) (“Agency
litigating positions are generally not entitled to Chevron deference, in part
because the agency is not exercising delegated authority when it takes
18
litigating positions and in part because of fairness concerns that the agency
as advocate will not develop interpretations solely through the use of
neutral expertise.”).
c. Interpretations by Officials with the Regional Federal
Reserve Banks
The Board of Governors’ past interpretations of the statute are
widely shared by officials of the regional Federal Reserve Banks, who join
the chorus of officials recognizing that the 1980 Deregulation and
Monetary Control Act extends Federal Reserve services to all nonmember
depository institutions. See, e.g., J.L. Jackson & Willis J. Winn, Foreword
to Federal Reserve Bank of Cleveland 1980 Annual Report 2, 2 (1981)
(stating that in light of the 1980 Deregulation and Monetary Control Act,
“[o]ur services will now be available to all depository institutions”),
available at https://www.clevelandfed.org/~/media/content/newsroom%20
and%20events/publications/annual%20reports/ar%201980%20the%20
monetary%20control%20act%20mandate%20for%20change%20pdf.pdf?la=
en; Elijah Brewer III, The Depository Institutions Deregulation and
Monetary Control Act of 1980, Econ. Perspectives, Sept.-Oct. 1980, at 3, 4
(stating that the 1980 Deregulation and Monetary Control Act requires the
Federal Reserve to “grant all depository institutions access to [Federal
Reserve] services”), available at https://www.chicagofed.org/digital_
assets/publications/economic_perspectives/1980/ep_sep_oct1980_part1_
19
brewer.pdf; Lynn Elaine Browne, The Evolution of Monetary Policy and
the Federal Reserve System Over the Past Thirty Years: An Overview, New
Eng. Econ. Rev., Jan.-Feb. 2001, at 3, 8 (stating that the 1980 Deregulation
and Monetary Control Act required the Federal Reserve to make Federal
Reserve services “available to all depository institutions”), available at
https://www. bostonfed.org/-/media/Documents/neer/neer101a.pdf; Anatoli
Kuprianov, The Monetary Control Act and the Role of the Federal Reserve
in the Interbank Clearing Market, Econ. Rev., July-Aug. 1985, at 23
(stating that the 1980 Deregulation and Monetary Control Act required
Federal Reserve services to be “made available to all depository
institutions on equal terms”), available at https://www.richmondfed.org/-
/media/richmondfedorg/publications/research/economic_review/1985/pdf/
er710403.pdf; Gary C. Zimmerman, The Pricing of Federal Reserve
Services Under the MCA, Econ. Rev., Winter 1981, at 22 (1981) (stating
that the 1980 Deregulation and Monetary Control Act “provides for access
by all depository institutions to major [Federal Reserve] services”),
available at http://www.frbsf.org/education/files/81-1_22-40.pdf.
d. Legislative History
If § 248a(c)(2) were ambiguous, we could rely not only on this
consensus of interpretation but also on Congress’s own expression of its
intent. Doing so, we find that Congress hoped to do exactly what it did do:
establish open access to Federal Reserve services.
20
In the years leading up to enactment of the 1980 Deregulation and
Monetary Control Act, Congress sought to establish open access to Federal
Reserve services. See, e.g., H.R. Rep. No. 95-1590, at 20 (1978) (“The
[House Committee on Banking Finance and Urban Affairs] believes that
the wide access to Federal Reserve services for nonmember banks
authorized by this bill will insure [sic] that a basic level of services is
available to all banks throughout this country on a nondiscriminatory
basis.”). This objective was ultimately implemented through 12 U.S.C.
§ 248a(c)(2). See, e.g., 126 Cong. Rec. 6250 (1980) (Conf. Rep.) (“House
amendment includes a provision for the Federal Reserve to . . . open access
to [Federal Reserve] services to all depository institutions on the same
terms and conditions as member banks.”). Thus, the legislative history
supports the widespread agreement that the 1980 Deregulation and
Monetary Control Act entitles every nonmember depository institution to
Federal Reserve services.
e. Interpretation of § 248a(c)(2) by Other Circuits and
Academics
This interpretation of § 248a(c)(2) is also supported by the case law
and academic commentary.
Two circuits have interpreted § 248a(c)(2) to establish open access to
Federal Reserve services. See Greater Buffalo Press, Inc. v. Fed. Reserve
Bank of N.Y., 866 F.2d 38, 40 (2d Cir. 1989) (stating that the 1980
21
Deregulation and Monetary Control Act made “check clearing services . . .
available to all banks”); Jet Courier Servs., Inc. v. Fed. Reserve Bank of
Atlanta, 713 F.2d 1221, 1222-23 (6th Cir. 1983) (stating that the 1980
Deregulation and Monetary Control Act made Federal Reserve services
“available to all banks”). The Federal Reserve Bank of Kansas City argues
that these interpretations appeared in dicta. But dicta or not, these
interpretations support open access to Federal Reserve services. By
contrast, no federal court has interpreted the statute as the Federal Reserve
Bank of Kansas City and the Board of Governors do.
Academics have agreed with our sister circuits, interpreting
§ 248a(c)(2) to entitle all depository institutions to Federal Reserve
services. See, e.g., Timothy K. Armstrong, Chevron Deference and Agency
Self-Interest, 13 Cornell J.L. & Pub. Pol’y 203, 231 n.148 (2004) (“[T]he
[1980 Deregulation and Monetary Control Act] requires all services to be .
. . made available to all depository institutions on equal terms.”); Thomas
C. Baxter, Jr. & James H. Freis, Jr., Fostering Competition in Financial
Services: From Domestic Supervision to Global Standards, 34 New Eng. L.
Rev. 57, 70 (1999) (“The Federal Reserve Banks are required by the [1980
Deregulation and Monetary Control Act] to provide all domestic depository
institutions, including U.S. branches of foreign banks, with payments
services ranging from currency and check collection to wire transfer and
securities settlement.” (footnote omitted)); Fred H. Miller, Robert G.
22
Ballen, & Hal S. Scott, Commercial Paper, Bank Deposits and Collections,
and Commercial Electronic Fund Transfers, 39 Bus. Law. 1333, 1365
(1984) (“The [1980 Deregulation and Monetary Control Act] . . . required
the Federal Reserve, for the first time, to provide access to virtually all of
its services to all depositary institutions on the same terms and conditions,
and to charge for such services.”). These interpretations of § 248a(c)(2)
support the widespread recognition that all nonmember depository
institutions are entitled to Federal Reserve services.
2. Section 342
The Federal Reserve Bank of Kansas City and the Board of
Governors contend that 12 U.S.C. § 342 creates discretion on whether to
issue a master account. This interpretation conflicts with (1) the statutory
text and (2) Supreme Court precedent interpreting an older, virtually
identical version of § 342.
Section 342 reads:
Any Federal Reserve bank may receive from any of its member
banks, or other depository institutions, and from the United
States, deposits of current funds in lawful money, national-
bank notes, Federal reserve notes, or checks, and drafts,
payable upon presentation or other items and also, for
collection, maturing notes and bills . . . .
12 U.S.C. § 342 (emphasis added).
Unlike § 248a(c)(2), § 342 is not a congressional command. The use
of “may” in § 342 indicates that Federal Reserve Banks have discretion.
Jama v. Immigration & Customs Enf’t, 543 U.S. 335, 346 (2005) (“The
23
word ‘may’ customarily connotes discretion.”). But this discretion does not
encompass the issuance of master accounts.
Section 342 addresses the types of monetary instruments that Federal
Reserve Banks may receive for deposit or collection. See Farmers’ &
Merchants’ Bank of Monroe v. Fed. Reserve Bank of Richmond, 262 U.S.
649, 662 (1923) (“But neither section 13, nor any other provision of the
Federal Reserve Act, imposes upon reserve banks any obligation to receive
checks for collection. The act merely confers authority to do so.”). But
§ 342 does not address which institutions can access Federal Reserve
services; that subject is governed instead by § 248a(c)(2), which
establishes open access to Federal Reserve services for all nonmember
depository institutions. As a result, § 342 does not affect Fourth Corner’s
entitlement to a master account.
* * *
Presenting an alternative ground to affirm, the Federal Reserve Bank
of Kansas City argues that Fourth Corner is not entitled to a master
account. I disagree. Under § 248a(c)(2), Fourth Corner is entitled to a
master account based on § 248a(c)(2)’s plain text, past and present
interpretations (outside of this litigation) by the Board of Governors,
interpretations by officials of regional Federal Reserve Banks, legislative
history, and interpretations by other courts and academics.
24
V. The Effect of Partial Preemption
The Federal Reserve Bank of Kansas City also invokes obstacle
preemption, 9 contending that Fourth Corner’s charter is preempted because
it poses an obstacle to Congress’s goals under the Controlled Substances
Act. According to the Federal Reserve Bank of Kansas City, this
preemption forecloses Fourth Corner’s right to operate a credit union. I
disagree.
Colorado granted Fourth Corner a charter, which is a one-page,
boilerplate document that authorizes Fourth Corner “to conduct business
pursuant to all of the powers conferred upon it by law.” Appellant’s App’x
at 224. 10 The charter does not mention marijuana.
Nonetheless, the Federal Reserve Bank of Kansas City invokes
obstacle preemption based on a four-step argument:
1. Fourth Corner’s application for a charter signaled an intent to
service marijuana-related businesses.
9
Obstacle preemption exists “where ‘under the circumstances of [a]
particular case, [the challenged state law] stands as an obstacle to the
accomplishment and execution of the full purposes and objectives of
Congress.’” Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363, 372-73
(2000) (alterations in original) (quoting Hines v. Davidowitz, 312 U.S. 52,
67 (1941)).
10
We can consider the charter because Fourth Corner quoted from the
charter in the amended complaint and the charter is central to Fourth
Corner’s claim. See GFF Corp. v. Associated Wholesale Grocers, 130 F.3d
1381, 1384 (10th Cir. 1997).
25
2. Colorado therefore issued the charter in order to facilitate
violations of federal law.
3. Because Colorado granted the charter for this purpose, the
charter poses an obstacle to the goals underlying the Controlled
Substances Act.
4. Thus, the charter is preempted.
In evaluating this argument, we can make four assumptions favoring the
Federal Reserve Bank of Kansas City:
1. The reason for the charter was to facilitate violations of federal
law.
2. Because Colorado granted the charter for this purpose, the
charter authorizes Fourth Corner to violate federal law.
3. The charter therefore poses an obstacle to Congress’s goals
under the Controlled Substances Act.
4. Preemption under the Controlled Substances Act is not limited
to impossibility preemption. 11
11
Impossibility preemption exists “where it is impossible for a private
party to comply with both state and federal law . . . .” Crosby v. Nat’l
Foreign Trade Council, 530 U.S. 363, 372 (2000). Some courts have held
that preemption under the Controlled Substances Act is limited to
impossibility preemption. For instance, in County of San Diego v. San
Diego NORML, the court stated that
[b]ecause Congress provided that the [Controlled Substances
Act] preempted only laws positively conflicting with the
[Controlled Substances Act] so that the two sets of laws could
not consistently stand together, and omitted any reference to an
intent to preempt laws posing an obstacle to the [Controlled
Substances Act], we interpret title 21 United States Code
section 903 as preempting only those state laws that positively
conflict with the [Controlled Substances Act] so that
simultaneous compliance with both sets of laws is impossible.
26
Even with these assumptions, the Federal Reserve Bank of Kansas City’s
argument would not justify the wholesale denial of a master account.
Under the preemption doctrine, “state law is displaced only ‘to the
extent that it actually conflicts with federal law.’” Dalton v. Little Rock
Family Planning Servs., 516 U.S. 474, 476 (1996) (quoting Pacific Gas &
Elec. Co. v. State Energy Res. Conservation & Dev. Comm’n, 461 U.S.
190, 204 (1983)). Thus, “‘a federal court should not extend its invalidation
of a statute further than necessary to dispose of the case before it.’” Id.
(quoting Brockett v. Spokane Arcades, Inc., 472 U.S. 491, 502 (1985)); see
also Planned Parenthood of Ind., Inc. v. Comm’r of Ind. State Dept. of
Health, 699 F.3d 962, 985 (7th Cir. 2012) (applying this principle in the
obstacle-preemption context).
Under this principle, Fourth Corner’s charter would be preempted
only to the extent that it authorizes service of marijuana-related
81 Cal. Rptr. 3d 461, 480-81 (Cal. Ct. App. 2008).
The Federal Reserve Bank of Kansas City argues that County of San
Diego lacks persuasive value because it preceded the Supreme Court’s
opinion in Wyeth v. Levine, 555 U.S. 555 (2009). But Wyeth served only to
clarify the standard for obstacle preemption in the context of drug-labeling
regulation and state tort suits; Wyeth did not address whether the
Controlled Substances Act can preempt state law under an obstacle-
preemption theory. Nonetheless, we can assume for the sake of argument
that preemption under the Controlled Substances Act is not limited to
impossibility preemption.
27
businesses. Thus, Fourth Corner would still be authorized to pursue its
broader mission of servicing the supporters of legalization.
Because the charter would not be completely invalidated, Fourth
Corner would remain entitled to a master account. Therefore, I would
reject the Federal Reserve Bank of Kansas City’s argument on obstacle
preemption. Rejecting this argument, I would reverse the dismissal.
VI. Prudential Ripeness
Judge Matheson concludes that the appeal is prudentially unripe
because (1) the Federal Reserve Bank of Kansas City might grant a master
account upon a new application with the assurances that Fourth Corner has
made in court proceedings and (2) postponement of judicial review would
not cause Fourth Corner a significant hardship. I disagree in light of the
amended complaint and the parties’ representations to the district court.
Together, they show with relative certainty that (1) the Federal Reserve
Bank of Kansas City will refuse to provide a master account even with an
unambiguous promise by Fourth Corner to refrain from servicing
marijuana-related businesses and (2) dismissal would result in significant
hardship for Fourth Corner, preventing it from accessing basic Federal
Reserve services for any patrons. 12
12
As Judge Moritz states, Fourth Corner represented that it had tried
and failed to obtain a correspondent relationship with another financial
institution that had a master account. Op. of Judge Moritz at 4 n.2.
28
A. The Doctrine of Prudential Ripeness
“The ripeness doctrine aims to prevent courts ‘from entangling
themselves in abstract disagreements’ by avoiding ‘premature
adjudication.’” Awad v. Ziriax, 670 F.3d 1111, 1124 (10th Cir. 2012)
(quoting Abbott Labs. v. Gardner, 387 U.S. 136, 148 (1967), abrogated on
other grounds by Califano v. Sanders, 430 U.S. 99, 105 (1977)). Ripeness
stems not only from Article III of the Constitution but also from prudential
considerations. Id. In applying these prudential considerations, we consider
“both the fitness of the issues for judicial decision and the hardship to the
parties of withholding court consideration.” United States v. White, 244
F.3d 1199, 1202 (10th Cir. 2001) (quoting Abbott Labs., 387 U.S. at 149).
B. Until we ordered supplemental briefing on prudential
ripeness, the parties had never raised this issue.
Roughly six months after oral argument, the panel ordered
supplemental briefing on whether we should consider prudential ripeness
sua sponte. Prior to this order, the parties had never mentioned a concern
about prudential ripeness.
As Judge Matheson states, we have the power to raise the issue sua
sponte. See Nat’l Park Hosp. Ass’n v. Dep’t. of Interior, 538 U.S. 803, 808
(2003) (“[E]ven in a case raising only prudential concerns, the question of
29
ripeness may be considered on a court’s own motion.”). 13 But having this
power does not mean that we should exercise it. And even if we were to
consider the issue sua sponte, we would have little reason to regard the
case as unripe.
C. Fitness of the Issue for a Judicial Decision
As discussed above, the first factor involves fitness of the issue for a
judicial decision. See Part VI(A), above. Here the issue involves the
sufficiency of the complaint. In my view, this issue is fit for a judicial
decision.
In assessing fitness for a judicial decision, we focus on whether
adjudication of this issue would turn on purely legal issues or would
instead require facts that may not be sufficiently developed. See Kan.
Judicial Rev. v. Stout, 519 F.3d 1107, 1118 (10th Cir. 2008). The
sufficiency of a complaint is a question of law, and that question of law is
not “fact-based.” See Carabajal v. City of Cheyenne, 847 F.3d 1203, 1212
(10th Cir. 2017) (stating that “the sufficiency of a complaint is a question
13
The U.S. Supreme Court has indicated that the prudential-ripeness
doctrine lies in tension with federal courts’ virtually unflagging obligation
to hear and decide cases within their jurisdiction. Susan B. Anthony List,
___ U.S. ___, 134 S. Ct. 2334, 2347 (2014); see Lexmark Int’l, Inc. v. Static
Control Components, Inc., ___ U.S. ___, 134 S. Ct. 1377, 1386 (2014)
(indicating that tension exists between prudential requirements and the
federal courts’ obligation to hear and decide cases when jurisdiction
exists); see also Reddy v. Foster, 845 F.3d 493, 501 n.6 (1st Cir. 2017)
(stating that in Susan B. Anthony List, the Supreme Court “cast a measure
of doubt upon ripeness’s prudential dimensions”).
30
of law”); Ashcraft v. Iqbal, 556 U.S. 662, 674 (2009) (“Evaluating the
sufficiency of a complaint is not a ‘fact-based’ question of law . . . .”). The
sufficiency of a complaint does not turn on facts in the real world; instead,
the sufficiency of a complaint turns solely on its allegations. Those
allegations must be credited regardless of what is happening in the real
world. See Part I, above. Thus, further factual development would not help
us decide the sufficiency of Fourth Corner’s amended complaint. This
complaint is either sufficient or not to state a valid claim. 14
14
Judge Matheson states that “we have found claims, and sometimes
entire cases, unripe at the motion-to-dismiss stage.” Op. of Judge
Matheson at 5. For this statement, he cites two of our opinions. But neither
opinion questioned the ripeness of an action when the appellate issue
involved the sufficiency of a complaint for purposes of a motion to
dismiss.
In the first case, Southern Utah Wilderness Alliance v. Palma, the
district court ordered dismissal based on a lack of standing rather than
insufficiency of the complaint. See S. Utah Wilderness All., 707 F.3d 1143,
1147 (10th Cir. 2013). In light of the reliance on standing, the district
court explained that it was basing the dismissal on Rule 12(b)(1) (which
involves subject-matter jurisdiction) rather than Rule 12(b)(6). S. Utah
Wilderness All. v. Palma, No. 2:07-CV-00199-CW, 2011 WL 2565198, at
*2 (D. Utah Apr. 4, 2011) (unpublished), aff’d & remanded, 707 F.3d 1143
(10th Cir. 2013). On appeal, we affirmed the dismissal, but held that the
case was not ripe for review. S. Utah Wilderness All., 707 F.3d at 1147.
In the second case, Salt Lake Tribune Publishing Co. v. Management
Planning, Inc., the district court addressed motions based on ripeness
(Rule 12(b)(1)) and failure to state a valid claim (Rule 12(b)(6)). Salt Lake
Tribune Pub. Co. v. Mgmt. Planning, Inc., No. 2:03-CV-565 TC, 2005 WL
2739148, at *4 (D. Utah Oct. 24, 2005) (unpublished), rev’d & remanded,
454 F.3d 1128 (10th Cir. 2006). In ruling on these motions, the district
court dismissed some claims on the ground that they were unripe. Salt Lake
31
Two of the three members of the panel conclude that we have enough
information to decide the sufficiency of the amended complaint: I have
concluded that we have enough information to reverse, and Judge Moritz
has elsewhere concluded that we have enough information to affirm.
Though we differ in our conclusions, we share a belief that we have
enough information to decide whether the amended complaint is sufficient
under Rule 12(b)(6).
Judge Matheson states that “[t]he ripeness problem here is not the
product of a pleading defect,” but stems instead “from a lack of developed
facts.” Op. of Judge Matheson at 3 n.2. Essentially, Judge Matheson
expresses uncertainty over whether a concrete dispute remains between the
parties. His concern stems from one allegedly missing piece of
information: What would happen if Fourth Corner makes a promise to the
Federal Reserve Bank of Kansas City to service marijuana-related
businesses only if doing so is legal? But we already know with relative
Tribune Publ’g Co., 454 F.3d at 1140-41. On appeal, we held that only one
of those claims was unripe. Id. at 1141. We did not deem any other claims
unripe.
As these opinions indicate, we have upheld dismissals by finding
cases or claims unripe under the general ripeness doctrine discussed in
Abbott Labs. v. Gardner, 387 U.S. 136 (1967), abrogated on other grounds
by Califano v. Sanders, 430 U.S. 99, 105 (1977). But none of our published
opinions have deemed a case or claim unripe under this doctrine when the
district court had based dismissal on insufficiency of the complaint.
Neither has the Supreme Court.
32
certainty that this promise would not make any difference to the Bank.
Thus, this piece of information is not missing.
The Federal Reserve Bank of Kansas City provided Fourth Corner
with eight reasons for denying the master account; Fourth Corner’s desire
to service marijuana-related businesses was only one of the reasons. See
note 2, above. The importance of the other reasons became readily apparent
in the hearing on the motion to dismiss. There the district court discussed
those reasons with an attorney for the Federal Reserve Bank of Kansas
City. In this discussion, the district court questioned the Federal Reserve
Bank of Kansas City about whether it would be willing to provide a master
account if Fourth Corner agreed not to service marijuana-related
businesses “unless and until there’s congressional action that says they
can.” Appellant’s App’x at 656. The attorney responded: “I seriously doubt
it would make a difference . . . . I think it’s important to recall that there
were eight reasons that were given . . . for denying the account.” Id.
The district court sought clarification on whether the attorney knew
whether his client would take issue with granting a master account even if
Fourth Corner agreed not to service marijuana-related businesses absent
congressional authorization. Id. at 658. The attorney responded: “I know
that my client feels very strongly about the other reasons that were given
for denying the master account to [Fourth Corner].” Id.; see also id. at
660-61 (“I can’t stand here and say, if we carve out the marijuana-related
33
businesses, that solves the problems, because there are other very serious
issues that the bank has to take into consideration in deciding whether or
not to grant a master account.”).
The district court pressed further, instructing the attorney to identify
the “reasons . . . [that were] so important that [Fourth Corner] can’t even
serve the [legalization supporters].” Id. at 658. The attorney gave three
reasons. The first was a lack of insurance for depositors. The attorney
characterized the lack of insurance as “a very important reason.” Id. at
662. The attorney’s second reason was that Fourth Corner was a “[d]e novo
[financial] institution,” meaning that Fourth Corner had “no operational
track record to demonstrate that it [could] . . . carry the financial load of
maintaining a master account.” Id. at 658 (italics in original). The attorney
noted that the Federal Reserve Bank of Kansas City “believes it is very
important that they don’t give master accounts to de novo institutions.” Id.
at 665 (italics in original). The attorney’s third reason involved Fourth
Corner’s lack of capital, described as a problem inherent to new credit
unions. Id. at 662. According to the attorney, this lack of capital “creates
an operational problem because you have to have money to kind of run the
operation while it’s getting up and running.” Id.
At oral argument and in supplemental briefing, the Federal Reserve
Bank of Kansas City retreated, indicating that it might grant a master
account if Fourth Corner submitted a new application and promised not to
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service marijuana-related businesses. I find this eleventh-hour reversal
unpersuasive.
In both district court and our court, Fourth Corner has promised to
service marijuana-related businesses only if such service is legal. In the
face of these assurances, the Federal Reserve Bank of Kansas City has
continued to resist granting a master account to Fourth Corner. In light of
this continued resistance, we know with relative certainty that the Federal
Reserve Bank of Kansas City will continue to refuse a master account even
if Fourth Corner reiterates the promises that it has made in district court
and in our court. In these circumstances, the sufficiency of the amended
complaint is fit for a judicial decision.
D. Fourth Corner’s Hardship
Dismissal based on prudential ripeness would foist a substantial
hardship on Fourth Corner, and the Federal Reserve Bank of Kansas City
does not suggest otherwise. For example, during the delay caused by a
dismissal, Fourth Corner will remain unable to access any Federal Reserve
services. As a result, Fourth Corner will remain unable to conduct any
business, even with members of social groups supporting the legalization
of marijuana. See Neb. Pub. Power Dist. v. MidAmerican Energy Co., 234
F.3d 1032, 1039 (8th Cir. 2000) (indicating that in analyzing hardship,
courts may examine the impact of delayed judicial resolution on the
parties’ “ability to plan and to conduct business operations”).
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E. Judge Matheson’s Proposed Requirement for Restarting this
Litigation
This hardship would be magnified under Judge Matheson’s approach.
Under his approach, Fourth Corner would need to submit a new application
to the Federal Reserve Bank of Kansas City. This application would consist
of not only the same materials that Fourth Corner has already submitted,
but also a conditional promise that Fourth Corner would service marijuana-
related businesses only if doing so is legal.
This conditional promise is the same one that already appears in the
amended complaint and that has been reiterated in oral argument in both
district court and our court. For four reasons, it would be inappropriate to
force Fourth Corner to follow Judge Matheson’s proposed requirement.
First, it is undisputed that the application for a master account does
not include any information about the applicant’s business plan. In making
this conditional promise, Fourth Corner would be sharing information
about its business plan with the Federal Reserve Bank of Kansas City. We
should hesitate to prohibit Fourth Corner (sua sponte) from going to court
until it does something that apparently deviates from the existing
procedure to obtain a master account.
Second, Fourth Corner has already made this conditional promise in
district court and in our court. What further is to be gained from making
this promise directly to the Federal Reserve Bank of Kansas City? If this
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conditional promise were going to sway the Federal Reserve Bank of
Kansas City, the Bank would already have issued a master account.
Nothing is stopping the Bank from issuing the master account based on the
conditional promise that has already been made in district court and in our
court.
Third, our decision today will apparently eliminate any possibility
that Fourth Corner would use a master account to service marijuana-related
businesses. In the amended complaint, Fourth Corner explained that it has
always intended to service marijuana-related businesses only if doing so is
legal. Today, two of the three panel members hold that servicing
marijuana-related businesses remains illegal under federal law.
With this holding by a panel majority, Fourth Corner will know that
servicing marijuana-related businesses is illegal. See Webbe v.
Commissioner, 902 F.2d 688, 689 (8th Cir. 1990) (discussing the weight
accorded to a concurrence joined by a panel majority). Therefore, we have
no reason to believe that Fourth Corner would intend to service marijuana-
related businesses after today’s issuance of our opinions. Indeed, in district
court and in our court, Fourth Corner expressly promised not to service
marijuana-related businesses upon a pronouncement like the one we make
today. As a result, it would make little sense for Fourth Corner to approach
the Federal Reserve Bank of Kansas City and promise to service marijuana-
related businesses only if such service is legal.
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Fourth, imposing this requirement on Fourth Corner would magnify
the hardship arising out of this dismissal. Even if Fourth Corner
immediately approaches the Federal Reserve Bank of Kansas City and
promises not to service marijuana-related businesses, months may pass
before a decision is made on whether to grant the master account. The
amended complaint details the considerable delay that has already taken
place, with Fourth Corner waiting roughly nine months before it learned
that it would not get a master account. During the newly created delay,
Fourth Corner would be paralyzed, unable to litigate the right to a master
account or to obtain services that are indispensable for a credit union.
For these four reasons, we should decline to require Fourth Corner to
again request a master account with a promise apparently going beyond
existing procedures.
VII. Conclusion
The district court dismissed the amended complaint, reasoning that
Fourth Corner would use the master account to violate federal drug laws.
This ruling was erroneous. The district court should have presumed that
Fourth Corner would follow the court’s determination that servicing
marijuana-related businesses is illegal. And in the amended complaint,
Fourth Corner essentially promised to obey the law that would be set out in
the eventual declaratory judgment. In these circumstances, the district
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court had little reason to jettison the standard on a motion to dismiss and
rely instead on suspicions about what Fourth Corner would do.
The Federal Reserve Bank of Kansas City makes two alternative
arguments to affirm.
First, the Bank contends that financial institutions lack a right to a
master account. I would reject this contention based on § 248a(c)(2)’s text,
the consensus of persuasive interpretations, and legislative history.
Second, the Federal Reserve Bank of Kansas City invokes obstacle
preemption, arguing that Fourth Corner’s charter impedes Congress in
achieving its objectives under the Controlled Substances Act. But at most,
the charter would be preempted only to the extent that it authorizes Fourth
Corner to service marijuana-related businesses. Fourth Corner would still
be authorized to service supporters of the legalization of marijuana. Thus,
regardless of whether the charter is partially preempted, Fourth Corner
would be entitled to a master account. As a result, I would reverse the
dismissal.
Judge Matheson concludes that dismissal is appropriate on
prudential-ripeness grounds. I respectfully disagree. This appeal is fit for a
judicial decision, and dismissal would hurl a significant, unwarranted
hardship on Fourth Corner.
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