First City Bank v. National Credit Union Administration Board , 111 F.3d 433 ( 1997 )

RYAN, J., delivered the opinion of the court, in which MOORE, J., joined. JONES, J. (pp. 439-42), delivered a separate dissenting opinion.

RYAN, Circuit Judge.

The plaintiff, First City Bank, filed this action under the Federal Credit Union Act (FCUA), 12 U.S.C. §§ 1751-1795k, the Administrative Procedure Act, 5 U.S.C. § 706, and the Declaratory Judgment Act, 28 U.S.C. §§ 2201-02, challenging the National Credit Union Administration’s (NCUA) interpretation of the FCUA. The Tennessee Bankers Association subsequently intervened as a plaintiff, and the AEDC Federal Credit Union, the Tennessee Credit Union League, and the Credit Union National Association intervened as defendants. The district court granted summary judgment for the defendants and intervenor-defendants, and the plaintiffs appeal arguing that the district court erred in concluding that the NCUA reasonably interpreted the FCUA to allow multiple occupational groups, each of which independently shares a “common bond,” to join a single credit union. As we shall explain, we agree that the district court erred, and will reverse.

I.

A.

First City is a Tennessee banking corporation, and a member of the Tennessee Bankers Association, the principal state trade association for commercial banks in Tennessee. Defendant NCUA is an executive branch government agency responsible for regulating federally insured credit unions. See generally 12 C.F.R. Ch. VII. It was established in 1970 to “prescrib[e] rules and regulations for the organization and operation of federal credit unions.” National Credit Union Administration, Office of Examination and Insurance, Federal Credit Union Handbook 2 (1988). Defendant AEDC Federal Credit Union is a federally chartered credit union. Defendants Tennessee Credit Union League and Credit Union National Association are trade associations for credit unions in Tennessee and nationally, respectively.

Congress passed the FCUA, creating federal credit unions, in response to the failed banks, high interest rates, and diminished credit opportunities that were a hallmark of the Great Depression. See T I Federal Credit Union v. DelBonis, 72 F.3d 921, 931-32 (1st Cir.1995). The purpose of the FCUA was to “establish a Federal Credit Unions System, to establish a further market for securities of the United States and to make more available to people of small means credit for provident purposes through a national system of cooperative credit, thereby helping to stabilize the credit structure of the United States.” 12 U.S.C. § 1751, reprinted in Credit Union National Association, Inc., Legislative History of the Federal Credit Union Act: A Study of the Historical Development From 1934 to 1980 of the Statute Governing Federal Credit Unions, quoted in DelBonis, 72 F.3d at 931. Thus, “[i]n effect, the Federal Credit Union Act created a localized and liberalized system of federal credit services,” and FCUs

enable the federal government to make credit available to millions of working class Americans. These organizations, often described as “cooperative association^] organized ... for the purpose of promoting thrift among [their] members and creating a source of credit for provident or productive purposes,” provide credit at reasonable rates to millions of individuals who— because they lack security or, as recent studies show, reside in low income areas or in communities primarily inhabited by racial minorities — would otherwise be unable to acquire it.

DelBonis, 72 F.3d at 931-32 (citation omitted). As DelBonis suggests, then, the purpose of the FCUA was “to encourage the proliferation of credit unions, which were expected to provide service to th[e] would-be customers that banks disdained.” First Nat’l Bank & Trust Co. v. National Credit Union Admin., 988 F.2d 1272, 1275 (D.C.Cir.1993) (FNBT I).

Under the FCUA, a federal credit union, or FCU, is owned and controlled by its members. 12 U.S.C. § 1757(6). An FCU can only make loans to and accept deposits from its own members and other credit unions. Id. § 1757(5).

Section 109 of the FCUA provides in pertinent part that

Federal credit union membership shall be limited to groups having a common bond of occupation or association, or to groups within a well-defined neighborhood, community, or rural district.

Id. § 1759 (emphasis added). The issue presented in this case involves only the “common bond” requirement for occupational credit unions, and does not involve associational or community credit unions.

One court has observed that

Congress assumed implicitly that a common bond amongst members would ensure both that those making lending decisions would know more about applicants and that borrowers would be more reluctant to default____ The common bond was seen as the cement that united credit union members in a cooperative venture, and was, therefore, thought important to credit unions’ continued success.

FNBT I, 988 F.2d at 1276. Another court has described the purpose of the common bond provision somewhat differently, emphasizing the need of members to elect directors who will represent their interests:

The purpose of the common bond provision is evident from the nature of the institutions created by the Act. A credit union has been aptly described as “a dem7 ocratically controlled, cooperative, nonprofit society organized for the purpose of encouraging thrift and self-reliance among its members____ [It] is fundamentally distinguishable from other financial institutions in that the customers may exercise effective control.” The union’s purposes are threatened by directors that are unmindful of members’ funds or unresponsive to their collective interests. Thus Congress ensured that federal credit unions would retain their character as self-managed cooperatives by establishing democratic principles of decision and control. The common bond provision reinforces this aim by advancing the formation of credit unions among groups that may realistically operate with unity of purpose. It encourages the election of directors who possess a common interest or occupation with the membership they serve.

Branch Bank & Trust Co. v. National Credit Union Admin. Bd., 786 F.2d 621, 626 (4th Cir.1986) (citation omitted).

“From 1934 until 1982 the NCUA interpreted the common bond requirement to mean that the members of each occupational FCU ... must be drawn from a single occupational group, defined to mean the employees of a single employer.” First Nat’l Bank & Trust Co. v. National Credit Union Admin., 90 F.3d 525, 526 (D.C.Cir.1996) (FNBT II) (citing 58 Fed.Reg. 40473 (July 28, 1993)), cert. granted, — U.S. -, 117 S.Ct. 1079, 137 L.Ed.2d 215 (1997). However, the NCUA had been tinkering with the common-bond requirement since 1967, gradually and consistently broadening the definition of the term. Finally, in 1982, the NCUA departed from its prior interpretation of the “common bond” language, and adopted a policy statement allowing multiple, or select, groups, each of which independently shared a common bond, to join together to form a credit union, so long as all the occupational groups “are located within a well defined area.” Interpretative [sic] Ruling and Policy Statement (IRPS) 82-1, 47 Fed.Reg. 16775 (Apr. 20, 1982). The NCUA stated that its purpose for the change was to “clarify NCUA’s policy on membership in Federal credit unions, ... and to ensure the continued availability of credit union service.” Id. Other available information suggests that

[t]he 1982 change of interpretation was intended to enable each FCU to realize economies of scale and to facilitate occupational diversification within the ranks of its membership____ The new policy also made it possible for the employees of a company with fewer than 500 employees, the minimum for forming a new FCU, to join an existing FCU.

FNBT II, 90 F.3d at 526-27 (citing Letter from E.F. Callahan, Chairman of the NCUA, to Congressman Fernand J. St. Germain, Chairman of the House Committee on Banking, Finance and Urban Affairs 8-9 (Oct. 28, 1983); IRPS 89-1, 54 Fed.Reg. 31165, 31171 (July 27, 1989)). The NCUA has continued to reiterate this position on the common-bond requirement, doing so most recently in 1994. See IRPS 89-1, 54 Fed.Reg. 31165 (July 27, 1989).

B.

First City originally filed suit against the NCUA in April 1994, seeking an order that the NCUA cease and desist from its current interpretation of the common-bond requirement. A credit union and two credit union trade associations — the AEDC Federal Credit Union, the Tennessee Credit Union League, and the Credit Union National Association, respectively — moved to intervene as defendants, and the Tennessee Bankers Association moved to intervene as a plaintiff. Both motions were granted. The plaintiffs then amended their complaint to include a request for invalidation of charter amendments expanding the membership base of AEDC, which amendments had been approved by the NCUA.

The parties filed cross-motions for summary judgment, and the district court ruled in favor of the defendants. First City Bank v. National Credit Union Admin., 897 F.Supp. 1042 (M.D.Tenn.1995). The court reasoned that “[t]he sole issue is the purely legal question of whether NCUA’s select group policy is a valid interpretation of the FCUA’s common bond provision,” and concluded that its analysis was governed by the Chevron doctrine. Id. at 1043 (citing Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-13, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984)). The court concluded that both parties’ “readings of the common bond provision are plausible. When an agency’s interpretation is one of two plausible alternatives, the statute is ambiguous. Thus, the Court cannot discern Congress’ precise intent of the common bond provision from the statutory language alone.” Id. at 1044 (citation omitted). It also concluded that the legislative history was meager, and “expressed no intent on whether multiple groups with common bonds could join a single credit union.” Id. at 1045. It nonetheless concluded that “NCUA’s change to its select group policy was entirely consistent with the[ ] congressional goals of promoting the continued growth and stability of credit unions,” and that the policy was justified because without it, many credit unions would not have survived. Id. at 1046.

The plaintiffs filed this timely appeal.

II.

Our review of the district court’s grant of summary judgment, which was premised on a question of statutory construction, is de novo. See Douglas v. Babcock, 990 F.2d 875, 877 (6th Cir.1993). The same rules of review apply where, as here, the parties have filed cross-motions for summary judgment. See Taft Broadcasting Co. v. United States, 929 F.2d 240, 248 (6th Cir.1991).

III.

Our analysis hinges on an application of the administrative-law doctrine announced by the Supreme Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). In Chevron, the Court explained as follows:

When a court reviews an agency’s construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. 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. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.

Id. at 842-43, 104 S.Ct. at 2781-82 (emphasis added) (footnotes omitted). Step one of a Chevron analysis, then, is an inquiry whether the statute dictates a particular answer, while in step two, a court may proceed to considering the permissibility of the agency construction.

The plaintiffs contend that the issue may be resolved at Chevron step one because the FCUA statutory language is clear and unambiguous. The NCUA, on the other hand, argues that its reading of the FCUA must be upheld because it reasonably resolves an issue as to which the intent of Congress has not been clearly expressed, either by the plain language of the statute or in the legislative history; that is, it believes that a Chevron step two analysis is required, and that its interpretation is owed deference by this court. Like the NCUA, the credit-union-intervenors believe that a Chevron step two analysis is necessitated because there is no basis for concluding that Congress had any intention with respect to the issue in this case. While contending that the literal language of the statute supports the NCUA’s interpretation, they also argue that even if the plaintiffs’ interpretation is plausible, that simply demonstrates that the statute is ambiguous, and the agency’s interpretation is owed deference.

To reiterate, the statutory language in ' question is the following:

Federal credit union membership shall be limited to groups having a common bond of occupation or association, or to groups within a well-defined neighborhood, community, or rural district.

12 U.S.C. § 1759 (emphasis added). The leading case, indeed the only court of appeals case, addressing the issue presented to this court, was decided only recently by the D.C. Circuit. See FNBT II, 90 F.3d 525. The D.C. Circuit concluded, under a Chevron step one analysis, that the statutory language and purpose were plain, and that the NCUA’s interpretation of the statute stood in direct contradiction. We agree.

The parties.offer various syntactical arguments in support of their positions. The plaintiffs argue that the statutory language is plain, since it requires every credit union to have “a common bond,” which they read to mean a single common bond. The NCUA counters first by arguing that because the statute includes the word “groups,” its multiple group policy constitutes a reasonable read; second by observing that the statute says “Federal credit union membership,” as opposed to “membership in Federal credit unions,” suggesting that the reference to plural “groups ” was meant to be within a single credit union, not multiple credit unions; and third by pointing out that the statute does not say that the groups must “share” a common bond, a word that it contends denotes mutuality, but only that the groups must “have” a common bond, suggesting that each group can separately have a common bond.

The FNBT II court considered and rejected similar, if not identical, arguments:

[The plaintiff] contends, first, that the article “a” in the phrase “groups having a common bond” means that all members of an FCU must be united by a single occupation. The NCUA counters that the plural noun “groups” in the same phrase indicates that there may be multiple groups in an FCU, so that the statute makes sense only if it is understood to contemplate multiple bonds, each uniting a single group even if the same bond does not'unite all groups, i.e., the membership as a whole.

Id. at 527-28. Like the FNBT II court, we find all the parties’ syntactical arguments to be unconvincing. Id. at 528. “The article ‘a’ could as easily mean one bond for each group as one bond for all groups in an FCU, and the plural noun ‘groups’ could refer not to multiple groups in a single FCU but to each of the groups that forms a credit union under the FCUA.” Id.

The plaintiffs offer another basis for their position, however, and we find it far more persuasive. They argue that because the occupational clause (“limited to groups having a common bond of occupation”) is followed directly by the community clause (“groups within a well-defined neighborhood, community, or rural district”), and because the two share the same syntactical structure, the two ought to be interpreted consistently. Therefore, since the NCUA only permits community-based credit unions to be based on membership in a single group from a single neighborhood, as opposed to multiple neighborhoods, the agency should apply the same interpretation to the occupation-based credit unions. The NCUA addresses this argument by asserting that the word “within” makes the difference; the statute states that a credit union must be composed of “groups within a well-defined neighborhood,” and it is the word “within” that necessitates the NCUA’s policy that membership may not consist of groups from widely dispersed locales. The credit-union-intervenors, on the other hand, address the plaintiffs’ “community” argument in an interesting way that the NCUA has not espoused: they contend that just because the NCUA has always interpreted the phrase to require membership from a single community does not mean that it could not employ a different interpretation, allowing multiple community groups to join together in a single credit union. The current interpretation, they reason, reflects a policy choice, not a statutory imperative.

The FNBT II court was presented with largely the same arguments, and sided with the analysis advanced by the plaintiffs here:

[T]he term “groups” in the two parallel provisions of § 109 [of the FCUA] — permitting credit unions composed either of (1) “groups having a common bond of occupation” among all the members or of (2) “groups within a well-defined neighborhood, community, or rural district” — must be interpreted in a consistent way. If the so-called community provision were construed in a manner consistent with the NCUA’s revised interpretation of the occupational provision, then a single FCU could include residents of any number of “well-defined neighborhood^], communities], or rural district^]” around the country. Yet this expansive construction has never been advocated by the NCUA; on the contrary, the NCUA regulation implementing the community provision expressly requires that all FCU members live, worship, or work in “a single, geographically well-defined area.”

Id. at 528-29 (citation omitted). We agree. It is a basic canon of statutory construction that phrases within a single statutory section be accorded a consistent meaning. The only reasonable way to read these two phrases, one following on the heels of the other, is as the FNBT II court does. We simply reject the NCUA’s focus on the word “within” as a distinguishing factor. And while we note the credit-union-intervenors’ argument that the NCUA could, if it chose, interpret the community provision more broadly, we note too and we think it is significant that the NCUA itself does not make any such claim.

Finally, and perhaps most importantly, if the NCUA’s interpretation is accepted, it would make the common-bond requirement meaningless. If credit unions are permitted to join together an infinite number of distinct groups, so long as each group has within it a common bond, it makes no sense to have the common-bond requirement at all; essentially, the NCUA’s interpretation would allow the joining together of many groups with completely diverse constituencies, basically obliterating any overall common bond. While we do not pretend to know the rationale behind the common-bond requirement— there being various possible explanations in a legislative history that all parties agree is ambiguous and unhelpful — we simply cannot conceive, and no one has suggested, any statutory rationale for requiring the type of “common bond” the NCUA has invoked.

IV.

Accordingly, we REVERSE the district court’s judgment, and remand the case for further proceedings. On remand, the district court should address the eredit-union-inter-venors’ argument that the plaintiffs’ suit is barred by a six-year statute of limitations, a factually intensive claim that this court is ill-equipped to consider in the first instance.