NATIONAL AUTOMOBILE DEALERS ASSOCIATION, Plaintiff, v. FEDERAL TRADE COMMISSION, Defendant.
Civil Action No. 11-1711 (ESH)
United States District Court, District of Columbia.
May 22, 2012.
864 F. Supp. 2d 65
ELLEN SEGAL HUVELLE, District Judge.
Plaintiffs contend that enhanced rates are now justified due to new complexity in election law—that the recent changes in the law have made the field obscure and difficult to master. See Reply [Dkt. 33] at 19. Plaintiffs argue that the specialized practice bar for election and campaign finance law requires more than an expertise in administrative law and an understanding of the regulations. They contend:
[P]ractitioners must be grounded in an obscure and relatively unpracticed area of constitutional law; they must understand the complicated maze of federal administrative law; and they must share a working knowledge of the incredibly intricate operation of campaign finance as it applies on-the-ground to political parties, speakers, grassroots organizations, and policy groups.
Id. at 18-19. This may be so, but the Court is not convinced that election and campaign finance law has changed so dramatically that binding Circuit precedent can be ignored. Accordingly, the request for enhanced hourly rates will be denied.
IV. CONCLUSION
For the reasons stated, the Court will grant in part and deny in part Plaintiffs’ motion for attorneys’ fees and costs [Dkt. #29]. Costs will be awarded in the amount of $350. Attorneys’ fees may be recovered at the rate of $181.37 per hour. No later than June 4, 2012, Plaintiffs shall file a revised affidavit of fees, together with a proposed order awarding fees, in accordance with this Opinion. A memorializing Order accompanies this Memorandum Opinion.
Michael Gary Charapp, Charapp & Weiss, LLP, McLean, VA, Daniel T. Plunkett, Gabriel A. Crowson, Gerard E Wimberly, Jr., McGlinchey Stafford, PLLC, New Orleans, LA, for Plaintiff.
Drake S. Cutini, Department of Justice, Washington, DC, for Defendant.
ELLEN SEGAL HUVELLE, District Judge.
The National Automobile Dealers Association (“NADA“) challenges the Federal
BACKGROUND
I. LEGAL FRAMEWORK
In 2003, Congress enacted the Fair and Accurate Credit Transactions Act of 2003 (“FACT Act” or “Act“), Pub.L. No. 108-159, 117 Stat.1952, to “prevent identity theft, improve resolution of consumer disputes, improve the accuracy of consumer records, [and] make improvements in the use of, and consumer access to, credit information.” Id. The FACT Act amended the FCRA by adding, among other things, a provision that governs the “[d]uties of users in certain [consumer] credit transactions.”
The Act also required the FTC to prescribe regulations to carry out the new risk-based pricing law, including set the “form, content, time, and manner of delivery of any notice under this subsection,” establish exceptions to the notice requirement, and “clarify the meaning of terms used in this subsection.”
NADA and two other associations in the automobile dealer industry submitted letters in which they argued that automobile dealers should be exempt from providing an RBPN when they engage in “three-party” financing transactions; that is, when the dealer agrees to extend financing to a consumer and then immediately assigns the loan to a third party, such as a bank or finance company. (App. at 64-82 (public comment letters dated August 2008).) In these circumstances, NADA explained, it is the third-party financing company, and not the dealer, that does the risk-based pricing, for it is the financing company that evaluates the consumer‘s credit and proposes a wholesale interest rate (the “buy” rate) at which it will underwrite the auto loan. (Id. at 63.) The dealer relies on the “buy” rate to offer the consumer an auto loan at a higher retail interest rate than is available to car buyers with better credit histories. (Id.) Therefore, NADA argued, the obligation to provide the RBPN should fall on the financing sources that set the risk-based price and not on the auto dealers. (Id. at 66.)
On January 15, 2010, the FTC adopted the Fair Credit Reporting Risk-Based Pricing Regulations. 75 Fed.Reg. at 2724-84. In the final regulations, it addressed—and rejected—NADA‘s argument, concluding that an initial creditor,5 such as an auto dealer, must provide the RBPN within the context of three-party transactions. Id. at 2730, 2759, 2775-76; see
On January 5, 2011, a few days after these rules took effect, NADA sought formal guidance from the FTC on whether
In March 2011, the FTC initiated a new rulemaking proceeding to amend the risk-based pricing regulations pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act“), Pub.L. No. 111-203, 124 Stat. 1376 (2010). Fair Credit Reporting Risk-Based Pricing Regulations, Notice of Proposed Rulemaking, 76 Fed Reg. 13902 (Mar. 15, 2011).6 At the FTC‘s suggestion, NADA submitted its January 5, 2011 inquiry as a comment in this recently-initiated rulemaking proceeding. (App. at 173-74; see also id. at 167-72.)7
On July 15, 2011, the FTC promulgated amendments to the Fair Credit Reporting Risk-Based Pricing Regulations. The amendments, codified at
In the preamble to the amended rule, the FTC published a section entitled “Supplementary Information” which included responses to various submissions received during the notice-and-comment period. See 76 Fed.Reg. at 41,602-26. In this section, the FTC set forth its Interpretation of the scope of the word “uses” as employed in
It is this interpretation that plaintiff challenges here. Specifically, NADA asserts that the Interpretation of
ANALYSIS
I. LEGAL STANDARD
Although motions to dismiss and for summary judgment are normally judged under different legal standards, the inquiry in this case is the same. See Marshall Cnty. Health Care Auth. v. Shalala, 988 F.2d 1221, 1222-23 (D.C.Cir.1993) (“The district court may, however, examine matters of public record in ruling on a Rule 12(b)(6) motion, and when a district court is reviewing agency action—sitting as an appellate tribunal—the legal questions raised by a 12(b)(6) motion and a motion for summary judgment are the same.“) However, since it is “the better practice,” id. at 1226 n. 5, the Court will convert defendant‘s motion to dismiss into a motion for summary judgment.
Under
II. ULTRA VIRES CHALLENGE
To assess NADA‘s first claim—that the Interpretation exceeds the FTC‘s statutory authority—the Court must begin “with the first step of the two-part framework announced in Chevron ... and ask whether Congress has ‘directly addressed the precise question at issue.‘” Mayo Found. for Med. Educ. & Research v. United States, 131 S.Ct. 704, 711 (2011) (quoting Chevron, U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 843 (1984)). “Under Chevron Step One, the court examines the statute de novo,” by applying “the traditional tools of statutory construction.” Eagle Broad. Group, Ltd. v. FCC, 563 F.3d 543, 550, 552 (D.C.Cir.2009) (citing Chevron, 467 U.S. at 842-43). “If this ‘search for the plain meaning of the statute ... yields a clear result, then Congress has expressed its intention as to the question,‘” and the court need not proceed further because “deference is not appropriate.” Eagle Broad., 563 F.3d at 552 (quoting Bell Atlantic Tel. Cos. v. FCC, 131 F.3d 1044, 1047 (D.C.Cir.1997)). However, if “Congress has not directly addressed the precise question at issue,” and the agency has acted pursuant to an
A. Chevron Step One
Although NADA and the FTC contend that the statute is unambiguous, and thus the inquiry should end at Step One, they disagree about the meaning of the term “uses.” (Pl.‘s Opp‘n at 7; Def.‘s Mot. to Dismiss at 13, 22.) Therefore, Court‘s first task is to determine whether the statute is ambiguous by “consider[ing] the provisions at issue in context, using traditional tools of statutory construction and legislative history.” Wells Fargo Bank, N.A. v. FDIC, 310 F.3d 202, 206 (D.C.Cir.2002).
The statute requires that
any person [who] uses a consumer report in connection with an application for, or a grant, extension, or other provision of credit on material terms that are materially less favorable than the most favorable terms available to a substantial proportion of consumers from or through that person, based in whole or in part on a consumer report, the person shall provide ... notice to the consumer in the form and manner required by regulations prescribed in accordance with this subsection.
“Uses” is not defined in the statute. The parties debate whether the term refers narrowly to direct use by those who obtain a physical copy of the report or whether it encompasses indirect or attenuated reliance upon the consumer report (i.e., based on use by third-party financing sources upon which the auto dealers depend).10 Plaintiff contends that, by employing the term “use,” the statute covers only auto dealers that physically “obtain, receive, or review a consumer report” and rely on the information contained within it to decide material terms of the consumer contracts. (Pl.‘s Mot. for Summ. J. at 1, 12) Defendant, by contrast, urges a broader definition, arguing that the provision applies to both auto dealers that obtain the physical report to use directly, as well as to Non-Consumer Report Dealers. (Def.‘s Mot. to Dismiss at 8.)
The term “use” is arguably susceptible to either definition. The inquiry, of
However, “[l]anguage, of course, cannot be interpreted apart from context,” Smith, 508 U.S. at 229, and both parties posit that the statutory context resolves any possible ambiguity. (Def.‘s Mot. to Dismiss at 17; Pl.‘s Opp‘n at 9; Pl.‘s Reply at 3-4); see also Smith, 508 U.S. at 229 (“The meaning of a word that appears ambiguous if viewed in isolation may become clear when the word is analyzed in light of the terms that surround it.“) The FTC argues that the statute‘s use of the terms “obtain,” “procure,” and “furnish” in other sections (e.g.,
However, NADA does not explain why, if Congress meant to limit the reach of
On the other hand, the FTC has not shown how the statute contemplates that an auto dealer that does not have the basic information contained in a consumer report (which is necessary to issue an RBPN), could provide one to a consumer.12 Although this does not necessarily render the Interpretation erroneous, see Union Bank v. Wolas, 502 U.S. 151, 158 (1991) (explaining that “[t]he fact that Congress may not have foreseen all of the consequences of a statutory enactment is not a sufficient reason for refusing to give effect to its plain meaning“), neither does it dispel the ambiguity that NADA has identified.
Finally, the parties contend that the legislative history confirms their reading of the statute. (Def.‘s Mot. to Dismiss at 19-22; Pl.‘s Mot for Summ. J. at 16-19.) However, there is no indication that Congress even considered the question. Instead, the snippets of legislative history that both have offered are, at best, evidence of the congressional purpose. None of these, however, provide clarity as to the meaning of “uses.” See Vencor, Inc. v. Physicians Mut. Ins. Co., 211 F.3d 1323, 1325–26 (D.C.Cir.2000) (explaining that appeal to the “‘broad purposes’ of legislation” may “ignore[] the complexity of the problems Congress is called upon to address and the dynamics of legislative action“) (quoting Bd. of Governors of the Fed. Reserve Sys. v. Dimension Fin. Corp., 474 U.S. 361, 373-74 (1986)).
Nor do NADA‘s citations to other cases involving
Ultimately, each party has shown that the statute is capable of supporting its interpretation, but neither has shown that the statutory text is unambiguous. Apotex Inc. v. FDA, 414 F.Supp.2d 61, 71-72 (D.D.C.2006) (finding ambiguity when “[t]he statute simply does not lend itself clearly to either approach urged by the parties here, and the text and reasonable inferences from it [do not] give a clear answer against either party“) (internal quotation marks omitted), aff‘d 226 Fed. Appx. 4, 5 (D.C.Cir.2007) (internal quotation marks omitted); see also PDK Labs. Inc. v. U.S. DEA, 362 F.3d 786, 796 (D.C.Cir.2004) (“That a statute is susceptible of one construction does not render its meaning plain if it is also susceptible of another, plausible construction....“). Thus, the Court cannot find “that the statute is unambiguous with respect to ‘the precise question at issue,‘” Wells Fargo Bank, N.A., 310 F.3d at 206 (quoting Chevron, 467 U.S. at 842), and will proceed to Chevron‘s second step.
B. Chevron Step Two
At Step Two, the sole question is whether the Interpretation is “a permissible construction of the statute.” Chevron, 467 U.S. at 843. However, before reaching this issue, two threshold arguments must be addressed. First, plaintiff argues that no deference is due because the FTC has not been delegated authority to regulate Non-Consumer Report Dealers. (Pl.‘s Mot. for Summ. J. at 22-24.) Alternatively, it argues, even if some level of deference were due, Chevron deference is not warranted here because the Interpretation was not the product of notice-and-comment rulemaking. (See id. at 19-20.)
1. Delegated Authority
“[D]eference to an agency‘s interpretation of a statute is due only when the agency acts pursuant to delegated authority.... Absent such authority, [a court] need not decide whether the regulations are otherwise reasonable” because “[a]n agency may not promulgate even reasonable regulations that claim a force of law without delegated authority from Congress.” Motion Picture Ass‘n of Am. v. FCC, 309 F.3d 796, 801 (D.C.Cir.2002) (internal quotation marks and citations omitted); Am. Bar Ass‘n v. FTC, 430 F.3d 457, 469 (D.C.Cir.2005) (“The deference mandated in Chevron ‘comes into play, of course, only as a consequence of statutory ambiguity, and then only if the reviewing court finds an implicit delegation of authority to the agency.‘“) (quoting Sea-Land Serv., Inc. v. Dep‘t of Transp., 137 F.3d 640, 645 (D.C.Cir.1998)).
It is undisputed that the FTC has been delegated authority to “prescribe rules” setting forth the content and timing of RBPNs and exceptions to the notice requirement and “clarify[ing] the meaning of the terms used in [§ 1681m(h)],”
2. Lack of Notice-and-Comment Rulemaking.
Even when an agency has been delegated authority to act, “no Chevron deference is due unless the agency‘s action has the ‘force of law.‘” Motion Picture Ass‘n of Am., 309 F.3d at 801 (quoting Mead Corp., 533 U.S. at 227). Since the interpretation was published in the preamble to the 2011 regulations and was not subject to notice-and-comment rulemaking proceedings, NADA argues that the Agency cannot claim Chevron deference. (Pl.‘s Mot. for Summ. J. at 22-24.)
The FTC‘s first argument, that it deserves Chevron deference because NADA is actually challenging the 2010 regulations (Def.‘s Opp‘n at 23),13 is unsupported by the record, which makes clear that the Interpretation arose in the preamble to the Dodd-Frank Act regulations. See Nat‘l Automobile Dealers Ass‘n, 670 F.3d at 269 (“The Commission announced this interpretation in a Federal Register notice accompanying its promulgation of an amended rule regulating ‘risk-based pricing’ of consumer credit.“). In the 2010 rulemaking, the FTC determined that auto dealers that were the initial creditors had to provide an RBPN even in the context of a three-party transaction where the financing source, and not the dealer, did the risk-based pricing. But, despite extensively detailing the obligations of original cred-
itors in numerous situations, neither the 2010 regulations nor the 2010 preamble provides any indication as to how to handle the situation where an original creditor auto dealer never physically obtains the consumer report. See 75 Fed.Reg. at 2724-84. Moreover, in the 2010 regulations, the FTC‘s conclusion that auto dealers “used” the consumer report was based on the assumption that the auto dealer obtained the consumer report and used the information therein to determine which financing source was “likely to purchase the retail installment sale contract.” Id. at 2730. Thus, the Interpretation, as published in 2011, is based on a consistent, but nonetheless different logic. Therefore, if the FTC‘s interpretation is entitled to Chevron deference, it must derive from the interpretation published in the preamble to the 2011 regulations.
However, notwithstanding the absence of notice-and-comment rulemaking, the interpretation is entitled to Chevron deference under Barnhart v. Walton, 535 U.S. 212 (2002). In Barnhart, the Supreme Court explained that less formal interpretations may still warrant Chevron deference if “the interstitial nature of the legal question, the related expertise of the Agency, the importance of the question to administration of the statute, the complexity of that administration, and the careful consideration the Agency has given the question over a long period of time all indicate that Chevron provides the appropriate legal lens through which to view the legality of the Agency interpretation here at issue.” Id. at 222; see
Indeed, the Court of Appeals has granted Chevron deference in analogous situations. See, e.g., Menkes v. U.S. Dep‘t of Homeland Sec., 637 F.3d 319, 331 (D.C.Cir.2011) (affording Chevron deference to Coast Guard decision in adjudicatory proceeding because it was “bound up with the administration of the ... scheme of regulating“); Mylan Labs., Inc. v. Thompson, 389 F.3d 1272, 1280 (D.C.Cir.2004) (according Chevron deference to FDA letter due to “complexity of the statutory regime under which the FDA operates, the FDA‘s expertise[, and] the careful craft of the scheme it devised to reconcile the various statutory provisions“). Similarly here, the FTC has been specifically charged with clarifying the terms of and establishing the procedure for a complex system to enable consumers to correct their credit reports and to prevent identity theft. Though
3. Reasonableness of Interpretation
At Chevron‘s Step Two, the question for the court is “whether the agency‘s position rests on a ‘permissible construction of the statute.‘” Mylan Labs., Inc., 389 F.3d at 1280 (quoting Chevron, 467 U.S. at 842-43). “If Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation” and “[s]uch legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.” Chevron, 467 U.S. at 843-44. Under this deferential standard, “a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency.” Id. at 844. Rather, courts must uphold an agency‘s interpretation if it is “reasonable and consistent” with the statutory purpose and legislative history. GTE Serv. Corp. v. FCC, 205 F.3d 416, 421 (D.C.Cir.2000). However, “a court will not uphold an interpretation ‘that diverges from any realistic meaning of the statute.‘” Id. at 421 (quoting Massachusetts v. Dep‘t of Transp., 93 F.3d 890, 893 (D.C.Cir.1996)).
Here, it is clear that the FTC‘s interpretation warrants deference. First, as shown in Section II(A), supra, the agency‘s interpretation of
Second, the agency reasonably interpreted “use” to promote the FCRA‘s goal of providing consumers with accurate information about their credit reports. (Def.‘s Mot. to Dismiss at 22-24.) The Interpretation is consistent with the FTC‘s regulatory regime, including the requirement that auto dealers that are initial creditors in three-party transactions provide the RBPN. 75 Fed.Reg. at 2730 (rea-
Even if compliance with the Interpretation could create “awkward and burdensome” situations, as plaintiff suggests (Pl.‘s Mot. for Summ. J. at 20), that does not render it unreasonable. See Apotex Inc., 414 F.Supp.2d at 72 (explaining that, even if the agency‘s approach is imperfect in practice, “that would not provide a sufficient basis to render the [agency‘s] approach impermissible under Chevron step two“). On the contrary, a third reason that the Interpretation is reasonable is that it avoids the difficulties that flow from NADA‘s approach. As defendant points out, NADA‘s interpretation could result in the confusing situation where consumers receive multiple notices or no notice at all, see 76 Fed.Reg. at 41,607 n. 9,15 which would clearly contravene the statute.16 Construing “use” as NADA suggests could also seriously undermine the application of other provisions in the FCRA that relate
Alternatively, even if it cannot claim Chevron deference, the agency would still prevail based on the persuasive power of its reasoning. In United States v. Mead Corp., 533 U.S. 218 (2001), the Supreme Court made clear that even a ruling made without the “force of law” is entitled to “claim the merit of its writer‘s thoroughness, logic and expertness, its fit with prior interpretations, and any other sources of weight.” Id. at 235. “The weight [accorded to an administrative] judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.” Id. at 228 (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)) (alteration in original).
Arguing that the Interpretation does not deserve Mead deference, NADA contends that it is not persuasive because it is not grounded in past precedent (Pl.‘s Mot. to Dismiss at 20-21; Pl.‘s Opp‘n at 10, 23-24; Pl.‘s Reply at 8), and because the practical difficulties it produces prove that is the product of either faulty reasoning or insufficient expertise. (Pl.‘s Mot. to Dismiss at 20-21; Pl.‘s Opp‘n at 10-12, 25; Pl.‘s Reply at 9.) This argument necessarily fails. For the same reasons that the Interpretation is reasonable, it is persuasive.
As an initial matter, it bears noting that, though the Interpretation was not subject to notice and comment, its promulgation was relatively formal as it was prompted by NADA‘s comment, submitted in a formal rulemaking process, and published in the Federal Register as part of RBPN rulemaking on a different issue.18 In addi-
Furthermore, it is critical to highlight the flip-side of NADA‘s practicality argument. While it decries the administrative burden the Interpretation imposes, NADA ignores the fact that its proposed interpretation presents its own problems (i.e., it could upset the administration of the broader statutory regime, result in consumers receiving confusing information, or prevent consumers from receiving any information at all). NADA also downplays the fact that the Agency considered the practical difficulties pointed out by NADA and, instead, dismisses the Agency‘s suggested alternatives (see supra note 17) as things that “generally do not” happen. (Pl.‘s Reply at 9.) However, the fact that Non-Consumer Report Dealers may have to operate differently does not call into question the FTC‘s decisionmaking.
While NADA may not like the Agency‘s conclusions, the persuasiveness of the FTC‘s reasoning entitles it to deference under Mead.
III. ARBITRARY AND CAPRICIOUS CHALLENGE
In its second claim for relief, NADA argues that, even if the FTC‘s interpretation survives Chevron, it is nonetheless “arbitrary, capricious, and otherwise not in accordance with law.” (Pl.‘s Mot. for Summ. J. at 24 (citing
Under
Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress had not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. Motor Vehicle Mfrs. Ass‘n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). The scope of review under this standard is narrow; it requires that an agency‘s decision be upheld “if the agency‘s path may reasonably be discerned” and reversed only where “there has been a clear error of judgment.” Id. (citations omitted).
NADA‘s arguments here echo those in its first claim. It contends that the FTC failed to consider the practical problems created by the Interpretation, used the “causal, transaction-based” analysis without any legal basis, and predicated its conclusion on an erroneous understanding of three-party transactions. (Pl.‘s Mot. for Summ. J. at 25.) However, as explained above, the Agency considered the practical implications of the issue and provided a well-reasoned basis for its decision that is consistent with the regulatory and statutory scheme. Regardless of whether the FTC‘s “causal, transaction-based” analysis had been previously articulated, the factors guiding this analysis are completely consistent with the Agency‘s preexisting regulations. NADA‘s protestations, including its arguments that the financing sources are not the auto dealers’ agents and that the burden on auto dealers would be “considerable” (Pl.‘s Reply at 9), do not establish an error of judgment or undermine the FTC‘s decision. Thus, there is no basis for invalidating the FTC‘s interpretation as arbitrary and capricious.
CONCLUSION
For the foregoing reasons, the Court denies plaintiff‘s motion and grants summary judgment to defendant. A separate order accompanies this Memorandum Opinion.
Tarsha WOOD, Plaintiff, v. DISTRICT OF COLUMBIA, Defendant. Civil Action No. 11–154 (ΑΚ). United States District Court, District of Columbia. May 22, 2012.