The banking industry's bid to restrict credit union membership got a boost last week when the Justice Department decided not to launch a Supreme Court appeal of a recent bank victory.
After six weeks of lobbying by the National Credit Union Administration and the American Bankers Association, Solicitor General Drew Days decided not to ask for a high court appeal in the key "common-bond" case.
His decision left the Credit Union National Association, the industry's leading trade group, to carry the ball.
The decision effectively reduces from 50% to around " 2.5% to 5%" the chances that the Supreme Court will accept an appeal, according to Durant Abernethy. general counsel for the trade group.
The more likely scenario now is that the National Credit Union Administration will return to the U.S. district court and argue the controversial AT&T Family Federal Credit Union case on the merits, hoping to establish exclusive authority once and for all to make decisions on field-of-membership expansions.
But even if the the federal agency wins that case, the banking industry appears to have won the issue of "standing," opening up future field-of-membership rulings by the regulator to a multitude of lawsuits by the banks.
New Law Seen as More Likely
The solicitor general's decision also make the chances of a legislative remedy more likely, because credit union lobbyists are expected to seek some kind of assistance from Congress in the next year or two.
"Congress is not going to stand idly by and watch another S&L debacle happen to the credit union industry," said David A. Daetwyler, president of AT&T Family.
The regulator's general counsel, Robert Fenner, who had asked the solicitor general to launch an appeal, expressed disappointment at the decision. He noted that even if the agency wins the case in the district court, "we're stuck with a bad decision [on standing], and the bankers can cause us a lot of problems."
In the case, four community banks in North Carolina and the ABA are seeking to overturn a decision by the credit union regulator to let AT&T Family, based in Winston-Salem, N.C., expand its field of membership to include nine select employee groups not affiliated with American Telephone and Telegraph Co.
The bankers' challenge was rejected by the U.S. District Court for the District of Columbia, which ruled that the banks lacked standing to challenge NCUA decisions.
But the district court's position on standing was overturned last April by the U.S. Appeals Court for the District of Columbia Circuit.
The decision of the appeals court gave bankers standing to challenge any NCUA field-of-membership rulings, and by extension, all other policy or regulatory decisions. As a result, the banking industry has launched field-of-membership challenges in several other states, including another suit in federal court in Michigan.
The AT&T Family case has enormous ramifications for the credit union industry, which has been hit hard by corporate failures and plant closings over the past decade and also will be hurt by planned closings of military bases. To help credit unions affected by plant and closures, the regulator has offered to liberalize guidelines for field-of-membership expansion.
Mr. Fenner had hoped for a Supreme Court appeal endorsed by the Justice Department to settle the issue of standing and discourage more challenges.
That issue having been decided for now, the case will return to the district court. If the regulator loses there, it will probably again ask the solicitor general to appeal to the Supreme Court, Mr. Fenner said.
He suggested that the solicitor general's decision was based on the assumption that the standing issue could be appealed to the top court later.
Michael Crotty, deputy general counsel for the ABA, suggested the solicitor general's decision will hasten a district court ruling on the case.
"This wise decision ... all but assures that there will be a determination of the merits of this case in the federal district court in rather short order," said Mr. Crotty, who lobbied the solicitor general on the case.
The solicitor general's decision does not rule out the regulator's participation before the Supreme Court if the court decides to hear the trade group's appeal, noted Mr. Fenner. The top court is expected to decide Oct. 15 whether to hear that appeal.