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New York Bankers Association, Inc. v. City of New York

United States District Court, S.D. New York

September 9, 2014

NEW YORK BANKERS ASSOCIATION, INC., Plaintiff,
v.
CITY OF NEW YORK, et al., Defendants.

OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge.

Plaintiff New York Bankers Association ("NYBA") initiated this action on October 11, 2013, seeking (i) a declaratory judgment that City Local Law 38 for the Year 2012 ("LL 38"), entitled the "Responsible Banking Act, " was preempted by federal and state law; and (ii) a permanent injunction prohibiting the implementation of LL 38. Plaintiff now moves for summary judgment on its claims. By contrast, Defendant Council of the City of New York (the "Council") moves to dismiss the Complaint on the grounds that Plaintiff does not have standing to pursue its claims, that its claims are not ripe, and that LL 38 is not preempted. For the reasons discussed in the remainder of this Opinion, the Court grants the Council's motion to dismiss the Complaint because Plaintiff lacks standing to pursue the claims it raised in October 2013, and denies as moot Plaintiff's motion for summary judgment.

BACKGROUND

A. Factual Background[1]

Plaintiff NYBA is an association of approximately 140 commercial banks and federal savings associations located in New York State. (Compl. ¶ 8). NYBA's members include national banks chartered pursuant to the National Bank Act of 1864 ("NBA"), ch. 106, 13 Stat. 99 (codified as amended in scattered sections of Titles 12, 19, and 31 of the United States Code); federal savings associations chartered pursuant to the Home Owners' Loan Act of 1933 ("HOLA"), Pub. L. No. 73-43, 48 Stat. 128 (codified as amended at 12 U.S.C. §§ 1461-1470); and commercial and thrift depository institutions chartered pursuant to the New York Banking Law ("NYBL"). ( Id. ). Several NYBA members serve as depositories for the funds of the City of New York (the "City"). ( Id. at ¶ 9).

1. The City Deposit System

The New York City Banking Commission (the "Banking Commission") was created in 1873 under the City Charter. (Compl. Ex. 3; N.Y.C. Charter § 1524(1)). The members of the Banking Commission are the Mayor of the City (the "Mayor"), the City Comptroller (the "Comptroller"), and the Commissioner of the City Department of Finance ("DOF"). ( Id. ). Among other things, the Banking Commission is responsible for designating which banks and savings associations may hold the City's funds. ( Id .; see also N.Y.C. Charter § 1524(1) (the Banking Commission "designate[s] the banks or trust companies in which all moneys of the city shall be deposited, and may by like notice in writing [to the Commissioner of the DOF] from time to time change the banks and trust companies thus designated")). Only institutions designated as deposit banks, or New York City Designated Banks ("Designated Banks"), by the Banking Commission may hold City funds. (Compl. Ex. 3).

To become a Designated Bank, an institution must submit an application that includes audited financial statements, historical financial information, an overview of the current managerial structure, its most recent federal Community Reinvestment Act rating, [2] and other detailed information. (Compl. Ex. 3). In addition, an institution must have a physical presence in the City. ( Id. ). As of May 2013, there were 25 Designated Banks, 17 of which were NYBA members. ( Id.; Compl. Ex. 2).

2. Local Law 38 and Its Enactment

Plaintiff seeks to have LL 38 declared preempted by federal and state banking laws. While the legislative history of LL 38 is relevant to the issue of Plaintiff's preemption claims, it is decidedly less relevant to the issue of whether Plaintiff has standing to pursue those claims. Because the Court need not, and does not, reach the issue of preemption, it need not discuss the legislative history of LL 38. Accordingly, it will suffice here to state that LL 38 was passed by the Council on June 28, 2012, over the May 30, 2012 veto of then-Mayor Michael R. Bloomberg. (Compl. Ex. 11, 12, 15).

LL 38 has several components. Principally, LL 38 establishes a Community Investment Advisory Board ("CIAB"), comprised of eight members (i) the Mayor or his designee; (ii) the Comptroller or his designee; (iii) the Council Speaker (the "Speaker") or her designee; (iv) the Commissioner of the Department of Housing Preservation and Development; (v) the Commissioner of the DOF; (vi) a member of a community-based organization "whose principal purpose is community and/or economic development, or consumer protection" designated by the Speaker; (vii) a representative of an organization or association that represents small business owners designated by the Speaker; and (viii) a representative of the City banking industry designated by the Mayor. (LL 38 sec. 1, subdiv. 2). The members of the CIAB were to have been appointed within 60 days of the date LL 38 took effect, or by August 27, 2012. ( Id. ) As of the filing of the Complaint, and as of August 19, 2014, the CIAB had not been fully appointed and had not convened a meeting. (Aug. 19 Tr. 6-8).[3]

The CIAB has three primary functions. First, it is tasked with completing a needs assessment. Specifically, the CIAB must assess the "credit, financial and banking services needs throughout the City with a particular emphasis on low and moderate income individuals and communities" (the "Needs Assessment"). (LL 38 sec. 1, subdiv. 1(a)). To achieve this goal, the CIAB must (i) convene "at least one public hearing in each borough of the city"; (ii) "accept[], review[], and consider[] public comments which describe the nature and extent of such needs"; and (iii) consider certain data and information pertaining to the City's deposit banks. ( Id. ). The first Needs Assessment was to have been published on the DOF's website by no later than March 1, 2014. ( Id. ). As of the filing of the Complaint, and as of August 19, 2014, no Needs Assessment had been published. (Aug. 19 Tr. 6-8, 24-25).

To complete the Needs Assessment, the CIAB is specifically tasked with collecting information at the "census tract level" relating to each deposit bank's efforts to (i) address the "key credit and financial services needs of small businesses"; (ii) develop and offer financial services and products that are "most needed by low and moderate income individuals and communities throughout the city, " as well as provide physical branches; (iii) provide funding for "affordable housing and economic development projects in low and moderate income communities"; (iv) address "serious material and health and safety deficiencies" in foreclosed and bank-owned properties; (v) "conduct consumer outreach, settlement conferences, and similar actions relating to mortgage assistance and foreclosure prevention, " and provide information at the "community district level" to the CIAB regarding those efforts; (vi) "partner in the community development efforts of the city"; (vii) "positively impact []the city" through activities such as "philanthropic work and charitable giving"; and (viii) plan for and articulate how the bank will respond to the "credit, financial and banking services needs" identified in the Needs Assessment. (LL 38 sec. 1, subdiv. 3). This information, "to the extent not deemed confidential or proprietary, " was to have been published on the DOF's website on or around March 1, 2014, and no later than March 1, 2014. ( Id. ). As of the filing of the Complaint, and as of August 19, 2014, no such information had been requested, collected, or published. (Aug. 19 Tr. 2-6, 93).

Second, the CIAB must use the information it gathers to "establish benchmarks, best practices, and recommendations for meeting the needs identified" in the Needs Assessment. (LL 38 sec. 1, subdiv. 1(a)). As of the filing of the Complaint, and as of August 19, 2014, no benchmarks had been set forth. (Aug. 19 Tr. 2-6, 36).

Third, the CIAB must compile and publish a report of its findings (the "CIAB Report"). The first such report was to have been published on the DOF website and transmitted to the Banking Commission by March 1, 2015, and each March 1 thereafter. (LL 38 sec. 1, subdiv. 1(b)). As of the filing of the Complaint, and as of August 19, 2014, no such Report had been published. (Aug. 19 Tr. 2-3, 93).

The CIAB Report must (i) evaluate how each deposit bank performed "relative to the benchmarks and best practices" established by the CIAB; (ii) identify "areas of improvement from past evaluations" as well as "areas where improvement is necessary" by the deposit banks in relation to the CIAB's "benchmarks and best practices"; (iii) "specifically identif[y] any deposit bank's failure to provide information requested in writing by" the CIAB; (iv) summarize any written comments submitted to the CIAB, and the role of those comments; and (v) "summarize[], in tabular format, the data collected" from the deposit banks, "to the extent not deemed confidential or proprietary by the bank, " at the "community district, borough, and citywide levels of aggregation." (LL 38 sec. 1, subdiv. 1(b)). Lastly, the Banking Commission "may" consider the CIAB Report when evaluating whether to designate an institution as a deposit bank. ( Id. ).

By letter dated May 30, 2012, Mayor Bloomberg vetoed LL 38. (Compl. Ex. 11). Mayor Bloomberg described LL 38 as a "misguided" attempt to overlay a third layer of regulation onto an already-existing regulatory landscape, and expressed a concern that LL 38 went far beyond the purpose and purview of the DOF. ( Id. ). The Mayor concluded that LL 38 was preempted by state and federal law, and that the law was ultimately "duplicative and a waste of taxpayer resources." ( Id. ).

3. The Stalled Efforts at Implementation of LL 38

On May 29, 2013, then-Speaker Christine Quinn wrote to Mayor Bloomberg to ask him to complete his appointments to the CIAB. (Compl. Ex. 14). Those appointments were to have been made by no later than August 27, 2012, but were not made. ( See LL 38 Sec. 1, Subdiv. 2). Deputy Mayor Robert Steel responded by noting that the Mayor believed LL 38 to serve no proprietary purpose, and to in fact be "illegal" and preempted by state and federal law. (Compl. Ex. 14). Accordingly, Mayor Bloomberg did "not intend to make the appointment[s] provided for in Local Law 38." (Compl. ¶ 30). Thus, Plaintiff alleged in ...


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