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American Bankers Association v. United States

United States Court of Appeals, Federal Circuit

August 8, 2019

AMERICAN BANKERS ASSOCIATION, WASHINGTON FEDERAL, N.A., INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiffs-Appellants
v.
UNITED STATES, Defendant-Appellee

          Appeal from the United States Court of Federal Claims in No. 1:17-cv-0194-SGB, Senior Judge Susan G. Braden.

          Stephen Joseph Obermeier, Wiley Rein LLP, Washington, DC, argued for plaintiffs-appellants. Also represented by Claire J. Evans, Michael E. Toner.

          Eric Peter Bruskin, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Joseph H. Hunt, Robert E. Kirschman, Jr., Kenneth M. Dintzer, Claudia Burke; Katherine H. Wheatley, Board of Governors of the Federal Reserve System, Washington, DC.

          Before Wallach, Chen, and Hughes, Circuit Judges.

          Hughes, Circuit Judge.

         This case arises out of legislation amending the statutory rate for dividend payments on Federal Reserve Bank stock. The Federal Reserve Act of 1913 set the dividend rate at six percent per year, which remained in effect until Congress amended the dividend provision in 2016. The amendment effectively reduced the dividend rate for certain stockholder banks from the fixed six percent rate to a lower variable rate. American Bankers Association and Washington Federal, N.A. sued the United States in the Court of Federal Claims, arguing that banks who subscribed to Reserve Bank stock before the amendment are entitled to dividends at the six percent rate. The complaint alleged that, by paying dividends at the amended statutory rate, the United States breached a contractual duty or, in the alternative, effected a Fifth Amendment taking. The trial court dismissed the complaint under Rules of the U.S. Court of Federal Claims 12(b)(6) for failure to state a claim. American Bankers and Washington Federal now appeal. Because the complaint does not allege facts establishing the existence of a contract or an unconstitutional taking, we affirm.

         I

         A.

         We begin with a brief overview of the Federal Reserve System and its statutory origins. The Federal Reserve Act of 1913, Pub. L. No. 63-43, ch. 6, 38 Stat. 251 (1913), [1] established a system to oversee banking operations and promote greater economic stability. The Federal Reserve System includes the Federal Reserve Board of Governors, see id., §§ 10-11, 38 Stat. 260-63, and twelve regional Reserve Banks, see id. § 2, 38 Stat. 251-52. The Board exercises broad regulatory supervision over the Reserve Banks, which serve as banks to the U.S. government and to commercial banks who are members of the Federal Reserve System.

         The Act sets forth the conditions under which commercial banks may join the Federal Reserve System. One of the conditions of membership is that member banks must "subscribe" to the stock of their regional Reserve Bank in an amount "equal to six per centum of the paid-up capital stock and surplus of [the] applicant bank . . . ." § 5, 38 Stat. 257. Every national bank[2] is required to join the system and subscribe to Reserve Bank stock. § 2, 38 Stat 252. Other financial institutions, such as state banks, are permitted but not required to apply for membership and subscribe to stock. § 9, 38 Stat. 259.

         Reserve Bank stock is "divided into shares of $100," which "shall not be transferred or hypothecated." § 5, 38 Stat. 257. From 1913 to 2015, the Act provided that "the stockholders of the [Reserve] bank shall be entitled to receive an annual dividend of six per centum on the paid-in capital stock . . . ." § 7, 38 Stat 258.

         On December 4, 2015, Congress passed the Fixing America's Surface Transportation Act (FAST Act), which authorized substantial appropriations for surface transportation infrastructure. See Pub. L. No. 114-94, 129 Stat. 1312. The FAST Act included an amendment to the statutory dividend rate for Reserve Bank stock owned by member banks with consolidated assets of more than $10 billion. Under the amended dividend provision, these banks would receive a variable dividend rate equal to the lesser of: (1) the rate of the 10-year Treasury note or (2) six percent. See § 32203, 129 Stat. 1739 (codified as amended at 12 U.S.C. § 289(a)(1)).

         B.

         Prior to 2013, Washington Federal operated as a federally chartered savings and loan association. On May 29, 2013, Washington Federal received approval from the Office of the Comptroller of the Currency to convert to a national bank, contingent on, inter alia, Washington Federal applying for membership in the Federal Reserve System.

         On July 8, 2013, Washington Federal submitted an application for Reserve Bank stock to the Reserve Bank of San Francisco (BSF). A letter from BSF, dated July 17, 2013, informed Washington Federal that its application and payment for stock had been processed and enclosed an Advice of Holdings for 479, 610 shares of BSF stock. The letter further noted that "[d]ividends are paid at the statutory rate of 6 percent per annum, or $1.50 per share semi-annually." J.A. 65.

         From 2013 to 2015, Washington Federal received dividend payments on its stock at a rate of six percent per year. After the FAST Act took effect on January 1, 2016, Washington Federal received dividends at the rate of the 10-year Treasury note. In 2016, Washington Federal received dividends totaling $502, 471.53, reflecting an annual rate of approximately two percent.

         C.

         Washington Federal and American Bankers Association[3] filed a complaint against the United States in the Court of Federal Claims on February 9, 2017.[4] The complaint alleged that, by paying dividends at a rate lower than six percent in 2016, the government breached a contractual duty to member banks that subscribed to Reserve Bank stock before December 4, 2015. The ...


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