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Wells Fargo Bank, N.A. v. Federal Deposit Insurance Corp.

May 18, 2004


Appeal from the United States District Court for the District of Columbia (Nos. 01cv2440, 01cv2445)

Before: Sentelle, Rogers, and Tatel, Circuit Judges.

The opinion of the court was delivered by: Tatel, Circuit Judge

Argued March 29, 2004

Responding to a congressional mandate, the Federal Deposit Insurance Corporation imposed a one-time assessment on certain financial institutions in order to boost the amount of money in the fund that insures savings-and-loan deposits. Several dozen financial institutions now challenge the method the FDIC used to calculate how much money it needed to raise -- a calculation that in turn determined the assessment the FDIC imposed. The district court disagreed with the institutions' assertion that the relevant statute unambiguously precludes the FDIC's method, and therefore dismissed their complaint. For the same reason, we affirm.


Reacting to the failure of hundreds of savings and loan associations in the 1980s, Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101–73, 103 Stat. 183 (1989) (codified as amended in scattered sections of 12 U.S.C.). Known as FIRREA and designed to protect depositors against similar failures in the future, the law amended the Federal Deposit Insurance Act by, among other things, creating a Bank Insurance Fund to cover deposits of commercial banks and a Savings Association Insurance Fund to cover deposits of savings and loan associations. The two funds, administered by appellee Federal Deposit Insurance Corporation (FDIC), and known as BIF and SAIF, respectively, are financed by assessments levied on the financial institutions whose deposits they insure.

Since its inception, SAIF has had a higher assessment rate than BIF, largely because the savings and loan associations it insures tend to be somewhat shakier than the banks insured by BIF. Congress recognized that this rate disparity could impel healthy savings associations to transfer their deposits to banks or even convert themselves into banks. Because such transfers and conversions would risk leaving SAIF with inadequate funds to insure members' deposits, FIRREA not only imposed fees on "conversion transactions" that transfer deposits between BIF members and SAIF members, but also temporarily prohibited such transactions. See 12 U.S.C. § 1815(d)(2) (2000). Neither the moratorium nor the fees, however, applied to so-called "Oakar transactions," under which a member of one fund acquires deposits from a member of the other and continues to pay proportional assessments into both funds. See id. § 1815(d)(3)(A)-(B). For example, a BIF member that acquired deposits from a SAIF member as part of an Oakar transaction would pay SAIF assessments on the acquired deposits and BIF assessments on its other deposits. See generally Wells Fargo, N.A. v. FDIC, 310 F.3d 202, 204–05 (D.C. Cir. 2002). Acquired deposits, known as adjusted attributable deposit amounts, or AADA, are adjusted over time according to a mathematical formula that accounts for subsequent growth. See 12 U.S.C. § 1815(d)(3)(C).

Concerned that SAIF was undercapitalized, Congress passed the Deposit Insurance Funds Act of 1996, Pub. L. No. 104–208, §§ 2701–11, 110 Stat. 3009 (1996) ("Funds Act"), the statute at issue in this case. The Funds Act required the FDIC to impose a one-time assessment on certain deposits, and to do so at a rate that would immediately bring the level of SAIF assets up to the "designated reserve ratio." See Funds Act § 2702(a) (codified at 12 U.S.C. § 1817 note (2000)). FIRREA defines the designated reserve ratio as "1.25 percent of estimated insured deposits," see 12 U.S.C. § 1817(b)(2)(A)(iv)(I), and the Funds Act incorporates that definition, see Funds Act § 2710(6) (codified at 12 U.S.C. § 1821 note (2000)).

In a final rule, the FDIC described how it calculated the rate for the one-time assessment. See 61 Fed. Reg. 53,834 (Oct. 16, 1996) (codified at 12 C.F.R. pt. 327 (2004)). The agency first determined the total amount of SAIF-insured deposits -- including, of importance to this case, AADA -- to be $688.1 billion. (In its calculations, the FDIC made other adjustments not at issue in this appeal.) Next, the agency calculated the balance SAIF would need in order to attain the designated reserve ratio, that is, 1.25 percent of estimated insured deposits. That balance was $8.6 billion, or $4.5 billion more than SAIF's balance at the time. Finally, the FDIC calculated what assessment rate, when levied on the funds that Congress designated for assessment (a designation not challenged in this case), would produce the required $4.5 billion. That rate was 65.7 cents per one hundred dollars of insured deposits.

After the FDIC imposed this assessment in late 1996, several dozen financial institutions (which we will refer to collectively as the Banks even though the group included some savings and loan associations) complained to the agency about its calculation of the assessment rate. They contended that the Funds Act prohibited the FDIC from including AADA, i.e., funds that BIF members had acquired from SAIF members, in its calculation of the total amount of SAIF-insured deposits. The reason, the Banks asserted, is that in FIRREA Congress defined "SAIF reserve ratio" -- a ratio that the Banks say lay at the heart of the calculations the FDIC made in preparing for the assessment -- using a narrower phrase than what appears in the statutory definition of designated reserve ratio. Specifically, whereas in FIRREA Congress defined designated reserve ratio simply as "1.25 percent of estimated insured deposits," it defined SAIF reserve ratio as "the ratio of the net worth of the [SAIF] to the value of the aggregate estimated insured deposits held in all [SAIF] members." 12 U.S.C. § 1817( l )(7) (emphasis added). Since AADA are held by BIF members, the Banks argued, they do not qualify as "insured deposits held in all [SAIF] members." According to the Banks, had the FDIC excluded AADA, they would have paid over $800 million less as part of the one-time assessment.

The FDIC's Board of Directors issued a decision denying the Banks' refund request, largely on the ground that AADA can constitute "insured deposits held in all [SAIF] members" because under FIRREA financial institutions can be members of both BIF and SAIF. Challenging this decision, the Banks filed two separate suits in the United States District Court for the District of Columbia, charging that the Funds Act unambiguously required the FDIC to exclude AADA from its calculation of SAIF-insured deposits. In two separate opinions, the district court rejected their argument and granted the FDIC's motion to dismiss, holding that the Funds Act unambiguously required the FDIC to include AADA. The court went on to hold that even were the statute ambiguous, the FDIC's approach was reasonable. Most of the Banks, appellants herein, now appeal, and because the two cases present the same issue, we consolidated them and now resolve them together.


We review de novo the district court's dismissal of the complaint, see, e.g., Taylor v. FDIC, 132 F.3d 753, 761 (D.C. Cir. 1997), and "therefore, in effect, review directly the decision of the [agency]," Lozowski v. Mineta, 292 F.3d 840, 845 (D.C. Cir. 2002). Because the Banks challenge the FDIC's interpretation of a statute the agency is charged with implementing, we proceed under the well-known framework set forth in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). We thus begin by asking "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." Id. at 842–43. Normally, were we to find the statute ambiguous, we would next ask "whether the agency's answer [to the precise question at issue] is based on a permissible construction of the statute." Id. at 843. In this case, however, the Banks make a Chevron step-one argument only, asserting that the Funds Act unambiguously resolves the question of whether the FDIC was to include AADA for purposes of calculating the proper assessment rate. They never argue that even if the Funds Act is ambiguous, they should still prevail because the FDIC's interpretation of the statute is unreasonable. See Appellants' Br. at 26 ("[T]he Funds Act is not ambiguous - Accordingly, there is no basis for reaching Chevron step two in this case."). We thus begin and end our analysis at Chevron step one.

The Banks assert that the Funds Act clearly required the FDIC to exclude AADA in calculating the SAIF reserve ratio because a key phrase in that ratio's definition is "estimated insured deposits held in all [SAIF] members." 12 U.S.C. § 1817( l )(7) (emphasis added). "On its face," the Banks insist, "this phrase does not include any deposits held by BIF members." Appellants' Br. at 18. The FDIC responds that the Banks' focus on the term "SAIF reserve ratio" is misplaced because the Funds Act does not use that term. Instead, it refers to the designated reserve ratio, which --because it applies to BIF as well as SAIF -- omits the words "held in all [SAIF] members" and simply uses the phrase "estimated insured deposits." See Funds Act § 2710(6). According to the FDIC, "[f]ocusing on the real statutory language quickly demolishes the Banks' 'plain language' argument." Appellee's Br. at ...

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