Builders Bank v. Federal Deposit Insurance Corp.
2017 U.S. App. LEXIS 996
| 7th Cir. | 2017Background
- Builders Bank (insured by FDIC) received an overall CAMELS rating of 4 after a June 2015 FDIC examination; the Bank sued under the APA claiming its overall rating should have been 3 and that the 4 was arbitrary and capricious.
- The district court dismissed for lack of jurisdiction, concluding CAMELS ratings are "committed to agency discretion by law" under 5 U.S.C. § 701(a)(2).
- FDIC policy rates six components (capital, asset quality, management, earnings, liquidity, sensitivity) separately and aggregates them into an overall CAMELS score.
- FDIC invoked statutory discretion over capital adequacy (12 U.S.C. § 3907(a)(2)) as barring judicial review of the rating; the panel assumed capital adequacy review is committed to agency discretion for purposes of § 701(a)(2).
- The Seventh Circuit held the § 701(a)(2) question concerns the merits (not jurisdiction), found potential justiciability because the rating affects insurance premiums, and concluded that an overall CAMELS rating is not necessarily insulated from review merely because one component is the unreviewable capital determination.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 701(a)(2) deprives court of subject-matter jurisdiction | Builders: § 701(a)(2) does not strip jurisdiction; challenge is reviewable under APA § 702 | FDIC: Assignment of CAMELS ratings is committed to agency discretion and thus not reviewable | Court: § 701(a)(2) is a merits rule, not a jurisdictional bar; dismissal for lack of jurisdiction was erroneous |
| Whether the CAMELS rating is a final, reviewable agency action | Builders: Rating has concrete effects (insurance premiums) and is justiciable despite possible additional steps | FDIC: Rating is not final; Bank failed to use internal appeals process | Court: Rating has sufficient concrete stake to be justiciable; finality may be contested but agency acquiescence permits review here |
| Whether statutory discretion over capital (12 U.S.C. § 3907(a)(2)) shields whole CAMELS rating from review | Builders: Challenges target non-capital components; do not attack capital floor | FDIC: Bank's claim is effectively a disguised challenge to capital adequacy, which is unreviewable | Court: Even assuming capital adequacy is unreviewable, that does not automatically immunize the entire CAMELS rating; courts can review non-capital components and even some factual calculations underlying capital findings |
| Appropriate disposition / next steps | Builders: Seek merits review and remand for consideration of substantive claims | FDIC: Prevail on § 701(a)(2) or for lack of finality/failed administrative remedies | Court: Vacated judgment and remanded for the district court to determine (on the merits) whether the Bank's claims are reviewable and whether they in fact challenge unreviewable capital decisions |
Key Cases Cited
- Heckler v. Chaney, 470 U.S. 821 (agency decisions to prosecute or not are presumptively unreviewable)
- Webster v. Doe, 486 U.S. 592 (reviewability questions under § 701(a)(2) treated on the merits)
- Lincoln v. Vigil, 508 U.S. 182 (courts decide § 701(a)(2) issues on the merits)
- Sackett v. EPA, 566 U.S. 120 (pre-enforcement review is permissible when agency action has concrete effects)
- Ass’n of Data Processing Servs. v. Camp, 397 U.S. 150 (pre-enforcement review doctrine)
- Vahora v. Holder, 626 F.3d 907 (7th Cir.: § 701(a)(2) concerns the merits, not jurisdiction)
- Frontier State Bank v. FDIC, 702 F.3d 588 (10th Cir.: reviewed CAMELS-related issues except to the extent capital adequacy was statutorily protected)