The LOAN SYNDICATIONS AND TRADING ASSOCIATION, Petitioner v. SECURITIES AND EXCHANGE COMMISSION and Board of Governors of the Federal Reserve System, Respondents.
Nos. 14-1240, 14-1304.
United States Court of Appeals, District of Columbia Circuit.
Argued Feb. 5, 2016. Decided March 18, 2016.
818 F.3d 716
Richard D. Klingler argued the cause for petitioner. With him on the briefs were Peter D. Keisler and Jennifer J. Clark.
Carl J. Nichols, Stephen V. Carey, Kate Comerford Todd, and Steven P. Lehotsky were on the brief for amicus curiaе the Chamber of Commerce of the United States in support of petitioner.
Joshua P. Chadwick, Senior Counsel, Board of Governors of the Federal Reserve System, argued the cause for respondents. With him on the brief were
Dennis M. Kelleher and Stephen W. Hall were on the brief for amicus curiae Better Markets, Inc. in support of respondents.
Before: GARLAND, Chief Judge, BROWN, Circuit Judge, and WILLIAMS, Senior Circuit Judge.
Opinion filed for the Court by Circuit Judge BROWN.
BROWN, Circuit Judge:
In the law, as in life, the simplest explanation is sometimes the best one. Cf. Commodity Futures Trading Comm‘n v. Zelener, 373 F.3d 861, 868 (7th Cir. 2004) (Easterbrook, J.) (Best to take Occam‘s Razor and slice off needless complexity.). So it is here. This case concerns a challenge, brought directly in this court, to a joint regulation implementing a section of the Securities Exchange Act of 1934 (Exchange Act). See
We have jurisdiction to hear petitions for direct review of agency action when Congress says so. See Sierra Club v. Thomas, 828 F.2d 783, 792 (D.C. Cir. 1987) ([C]ourts have just so much jurisdiction as Congress has provided by statute.). The Exchange Act provides a limited grant of jurisdiction. Only rules implementing specific, enumerated sections of the Act are entitled to direct review. See
Unable to exercise review ourselves, we transfer the petitions in the interest of justice to the United States District Court for the District of Columbia. See
I
Enacted two years after the financial crisis of 2008, the Dodd-Frank Act spelled a sea change in the regulation of the nation‘s financial markets. Section 941 of the Act, at issue in this case, took aim at abuses in the packaging and sale of asset-backed securities, which some in Congress considered a major contributing factor to the financial crisis. S.Rep. No. 111-176, at 128 (2010).
To recalibrate the incentives that fueled excesses and abuses, id., Congress required securitizers—a term of art generally referring to those who issue or organize asset-backed securities—to retain at least five percent of the underlying credit risk, see
In this petition, a trade group, the Loan Syndications and Trading Association (LSTA), challenges several aspects of the rule as contrary to law or arbitrary and capricious. LSTA takes particular issue with the agencies’ decision to extend the credit risk retention requirement to managers of open market collateralized loan obligations, which are specialized investment vehicle[s] designed to invest in large loans issued to companies without strong credit. Br. fоr Chamber of Commerce of the United States as Amicus Curiae 5-6.
As it turns out, LSTA‘s challenge on the merits will have to wait. They have sought review of agency action in the wrong court. City of Rochester v. Bond, 603 F.2d 927, 931 (D.C. Cir. 1979).
II
A
In 1946, soon after the dawn of the administrative state, Congress passed the Administrative Procedure Act (APA), a seminal statute that prescribes the standard of review applicable to agency actions. See
Amidst this complicated legal landscape, we can nevertheless deduce some general principles. Because district courts have general federal question jurisdiction under
Placing initial review of agency actions in the courts of appeals often makes good sense. [A]gencies typically compile records, rendering the district court‘s fact-finding capacity . . . unnecessary. Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985). And because appeals are all but guaranteed, requiring district court review may only add delay and expense. Those fac-
B
By its own terms, the Credit Risk Retention Rule at issue implemented a section of the Exchange Act added by the Dodd-Frank Act. See 79 Fed. Reg. at 77602 (explaining that the agencies are adopting a joint final rule . . . to implement the credit risk retention requirements of section 15G of the Securities Exchange Act of 1934, codified at
We consider first the text and structure of that jurisdictional scheme. The Exchange Act treats challenges to orders and rules differently. Under section 78y(a), challenges to orders may be heard directly in the courts of appeals.
While section 78y(b)(1) speaks of rule[s] of the Commission, Congress recognized that other agencies may be charged with rulеmaking authority under the Exchange Act. Section 78y(d) provides that the term Commission in the direct review statute includes the agencies enumerated in section 78c(a)(34) of this title insofar as such agencies are acting pursuant to this chapter.
Because LSTA challenges a rule, the operative provision is 78y(b)(1). See Am. Petrol. Inst., 714 F.3d at 1333. Under that section, only rules implementing certain sections of the Exchange Act may proceed directly to the courts of appeals. Here, the agencies implemented section 78o-11 of the Exchange Act. See 79 Fed. Reg. at 77602. Section 78o-11 is not listed in section 78y(b)(1), and we treat the Board as the Commission under subsection (d). Arguably, the district court—not this court—has jurisdiction to hear this challenge. See
A review of legislative history supports that conclusion. As originally enacted in 1934, the Exchange Act contained only section [78y](a)‘s grant of original appellate jurisdiction to review Commission final orders. Am. Petrol. Inst., 714 F.3d at 1334. [T]he omission of rules or regulations . . . was no mere оversight on the part of Congress. PBW Stock Exch., Inc. v. SEC, 485 F.2d 718, 723 (3d Cir. 1973). It instead reflected a clear and unequivocal
In 1975, Congress changed course, amending the Exchange Act to provide for direct review of rules—but not all rules. In what is now codified at 78y(b)(1), Congress establish[ed] a statutory review procedure for certain SEC rules. S.Rep. No. 94-75, at 36 (1975) (emphasis added). According to the legislative history of the 1975 amendments, Congress targeted certain sections of the Act directly relаting to the operation or regulation of the national market system, a national clearing system, or the SEC‘s oversight of the self-regulatory organizations. Id.
In keeping with that narrow focus, Congress has only once added a provision to the list. See Am. Petrol. Inst., 714 F.3d at 1335. In 1990, Congress enacted the Market Reform Act which, among other things, prohibited practices adversely affecting market volatility. Id. The Act simultaneously amended section 78y(b)(1) to provide for direct appellate review of rules implementing that prohibition. Id.; see
By contrast, Congress did not add section 78o-11 to the list of provisions entitled to direct review. As we concluded in a similar case involving a section of the Exchange Act added by the Dodd-Frank Act, that omission suggests quite clearly that Congress, for whatever reason, intended challenges to section [78o-11] regulations to be brought first in the distriсt court. Am. Petrol. Inst., 714 F.3d at 1335. In light of the clarity of the Exchange Act‘s direct-review provision, the presumption in favor of appellate review does not apply. See id. at 1336 (failing to identify any ambiguity in the Exchange Act‘s direct-review provision). Mindful that our jurisdiction under a direct review statute is strictly limited to the agency action(s) included therein, we conclude that jurisdiction lies in the district court. See NetCoalition, 715 F.3d at 348.
C
In hopes of slipping that conclusion, the parties claim we have jurisdiction based on the agencies’ invocation of other statutes, some of which contain direct-review provisions, in the authority, purpose and scope provisions of the challenged rule. See 79 Fed. Reg. at 77764-66. We disagree.
In keeping with Congress‘s requirement to jointly promulgate the rule,
Based on these separate invocations, the parties suggest we have jurisdiction under any of three statutes that provide for direct review: (1) the Securities Act of 1933 (Securities Act),
The Securities Act authorizes direct review of Commission order[s] made
Moving to the Exchange Act, we have established that the Act‘s direct-review provision allows limited review of rules. The Commission‘s separate codification invoked section 78o of the Exchange Act as an additional source of authority. Within section 78o, only subsections 78o(c)(5) and (6) receive direct review. See
The рarties hang most of their hopes, however, on the BHCA. That statute vests broad regulatory authority in the Board over bank holding companies to . . . prevent possible abuses related to the control of commercial credit. Bd. of Governors Fed. Reserve Sys. v. Dimension Fin. Corp., 474 U.S. 361, 365 (1986) (omitting internal quotation and citation). Orders and rules made pursuant to the BHCA may be challenged directly in the courts of appeals. See
None of these statutes changes our conclusion that jurisdiction rests with the district court. The joint nature of the rulemaking makes this case unique. Our past cases tended to involve relatively simple rules issued by a single agency. In Media Access Project v. FCC, for instance, we considered a rule implementing a requirement in the
Similar reasоning led this court to find appellate jurisdiction in International
In Pena and Media Access Project, the agencies could colorably rely on broad grants of organic statutory authority. We confront a different scenario in this case. Congress instructed the agencies to issue a joint rule—a rule that neither party suggests the agencies had authority to promulgate on their own. Indeed, the petitioner concedes that none of the individual agencies could have separately passed the entirety of the rulе. See LSTA v. SEC, Nos. 14-1240, 14-1304, Oral Argument Tr. 8 (D.C. Cir. Feb. 5, 2016).
Consider, for instance, the Board‘s authority. At oral argument, government counsel admitted that the Board could not have issued an identical rule. See LSTA v. SEC, Nos. 14-1240, 14-1304, Oral Argument Tr. 61 (D.C. Cir. Feb. 5, 2016). Instead, we are told that the Board could have issued a rule requiring bank holding companies to retain risk. Even so, that rule is not this rule, which was promulgated jointly and reaches securitizers of all kinds, not only banks. See, e.g., 79 Fed. Reg. at 77608-09 (defining the statutory term securitizer tо include, broadly speaking, anyone who sponsor[s] an asset-backed securities transaction). The same holds for other statutes on which the parties rely. Whatever their import, the parties do not suggest those statutes colorably authorized the joint rule before the court.
In light of the unique nature of this joint rulemaking, and the parties’ concession that other statutes did not justify the final rule, we conclude that the agencies rеlied on the grant of authority in section 78o-11 of the Exchange Act. See 79 Fed. Reg. at 77602 (stating that the agencies are adopting a joint final rule . . . to implement the credit risk retention requirements of section 15G of the Securities Exchange Act of 1934). The Exchange Act, in turn, does not permit direct review of rules implementing section 78o-11. See
In the absence of any statute that colorably provides jurisdiction for direct review of this joint rule, we have no occasion to apply the doctrine of pendant appellate jurisdiction. Discretionary in nature, that doctrine permits us to hear claims over which we otherwise lack jurisdiction that are closely related to claims over which we have jurisdiction. See Pub. Citizen, Inc. v. NHTSA, 489 F.3d 1279, 1288 (D.C. Cir. 2007); see also Shell Oil Co. v. FERC, 47 F.3d 1186, 1195 (D.C. Cir. 1995) ([W]here an agenсy order arising from a common factual background and addressing a common question of law relies on two statutory bases that give rise to separate paths for judicial review, the entire order should be reviewed . . . in the court of appeals.). Because none of the statutes on which the parties rely support jurisdiction, we have nothing to which pendant jurisdiction may attach.
In any event, we would decline to exercise pendant appellate jurisdiction in this case. See Kilburn v. Socialist People‘s Libyan Arab Jamahiriya, 376 F.3d 1123, 1136 (D.C. Cir. 2004) ([W]hether or
Consequently, petitioners must proceed in district court. Because the district court has jurisdiction to review the entire regulation, our decision poses no risk of denying the parties a forum capable of treating the case coherently. See Int‘l Bhd. of Teamsters, 17 F.3d at 1482.
III
In the end, the simplest explanation is the right one. The Credit Risk Retention Rule imрlemented section 78o-11‘s command to craft a joint rule of wide application. For reasons unknown, Congress failed to include that section among those entitled to direct review. See
The simplest solution is not always the most satisfying. Both parties understandably want finality. With every passing day, the rule‘s compliance deadline of December 24, 2016, marches closer. See 79 Fed. Reg. at 77602. Requiring the parties to proceed in district court no doubt costs the parties time and money, and leaves regulated parties in a state of suspense. Indeed, sound policy may well dictate that judicial review of these agency actions should proceed initially in the court of appeals. Five Flags Pipe Line Co. v. Dep‘t of Transp., 854 F.2d 1438, 1441 (D.C. Cir. 1988).
But this court simply is not at liberty to displace, or to improve upon, the jurisdictional choices of Congress—no matter how compelling the policy reаsons for doing so. Id. By limiting direct review to certain sections of the Exchange Act, Congress knew it would be sending some cases to the district court that could be resolved more efficiently at the appellate level. See Am. Petrol. Inst., 714 F.3d at 1337. As a court of limited jurisdiction, we must take our cues from Congress, not from considerations of sound policy. See Five Flags Pipe Line Co., 854 F.2d at 1441 ([A]s creatures of statutes, however, courts can exercise only such power as has been specifically granted them.).
Congress has provided a mechanism that mitigates the disruption and delay occasioned by our decision. Under
We therefore transfer the petitions in the interest of justice to the United States District Court for the District of Columbia.
So ordered.