# In the United States Court of Federal Claims

No. 17

- 194 Filed : October 3 0 , 2017 ∗

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*

* AMERICAN BANKERS ASS OCIATION
, * and WASHINGTON FEDERAL, N.A., * Individually a nd o n Behalf of All Others * Similarly Situated, *

* Plaintiff s , *

*

v. *

* THE UNITED STATES, *

* Defendant

. *

*

*

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Stephen J. Oberm e ier , Wiley Rein LLP, Washington, D.C., Counsel for Plaintiff.

Eric Peter Bruskin , United States Department of Justice, Civil Division, Washington, D.C., Counsel for the Government.

MEMORANDUM OPINION A ND FINAL ORDER GRANTING THE GOVERNMENT’S MOTION TO DISMIS S

BRADEN
, Chief Judge.

In 2015, w ithout any hearings, Congress enact ed the Fixing America’s Surface Transportation Act (“FAST Act”) to provide $2.7 billion over five years for national transportation infrastructure and other related surface transportation issues that was signed by former President Obama on December 5, 2015 . To help fund the, aptly named, FAST Act , Congress amend ed the

∗ On October 27, 2017, the court provided a sealed c opy of this Memorandum Opinion a nd Final Order to the parties to redact any confidential and/or privileged information from the public version and note any editorial errors that required correction s. The parties had until October 30, 2017 to file proposed redactions and/or corrections

. N either party filed redactions. The court incorporated all appropriate corrections. Associational Standing; Breach of Contract; Duty of Good Faith and Fair Dealing; Federal Reserve Act of 1913 , Pub. L. No. 63

- 43, ch. 6, 38 Stat. 251 ; 12 U.S.C. §§ 222, 226, 241, 247(a), 248, 261, 282, 287, 289, 301

– 305, 321, 341, 391 (2012); 12 U.S.C. § 289 (2012 & Supp. III 2016); Fixing America’s Surface Transportation Act , Pub L. No. 114

- 94 , 129 Stat. 1312 (2015) ; Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103

- 66, 107 Stat. 312 (1993); U.S. C ONST

. amend. V, Taking Clause

.2 Federal Reserve Act of 1913

, by substantially reducing the historic statutory six percent dividend paid to certain member banks on their Federal Reserve stock.

For the reasons discussed herein, as a matter of law, Washington Federal , N.A. (“Washington Federal”)

, individually and on behalf of other nation al banks similarly situated, have no contractual or statutory entitleme nt to a dividend at any specific rate nor a property inter est in which to assert a Taking Clause claim under the Fifth Amendment to the United States Constitution. T he remedy for the understandable grievances alleged in this case l i e s within the exclusive jurisdiction of the Congress

.

I. FACTUAL B ACKGROUND. 1

A. The Federal Reserve Act.

On December 23, 1913, Congress enacted the Federal Reserve Act of 1913 (“the Federal Reserve Act”)

, Pub. L. No. 63

- 43, ch. 6, 38 Stat. 251 (codified as amended at 12 U.S.C. §§ 221

– 522), to establish the Federal Reserve System

. Therein

, a seven

- member Board of Governors (“the Federal Reserve Bank Board”) was established

, including the Secretary of the T reasury and the Comptroller of the Currency, to set monetary policy through discount rates, reserve requirements, and open market operations, with advice about general business conditions from the Federal Advisory Council and twelve regional Federal Reserv e Banks. See §§ 10

– 12, 14, 38 Stat. at 260

– 65 (codified as amended at 12 U.S.C. §§ 241, 247a, 248, 261, 353 )

.

E ach of the twelve Federal Reserve Banks ha s authority to exercise certain enumerated
powers within its assigned geographic area and is governed by a nine

- member board of directors that report s directly to the Federal Reserve Bank Board. See § 13 , 38 Stat. at 2 54

– 56 (codified as amended at 12 U.S.C. §§ 301

– 305 , 341 )

. The Federal Reserve Banks also serve as deposit institutions for United States Treasury funds

. See § 13 , 38 Stat. at 265 (codified as amended at 12 U.S.C. § 391 )

. In addition, t he Federal Reserve Act require s that all banks with national charters (“national banks”) must become members of “the Federal Reserve System b y subscribing and paying for stock in the Federal [ R ] eserve [ B ] ank

, ” in an amount “equal to six [ percent ] of the bank’s paid

- up capital stock and surplus

, ” at a price set a t $100 per share. See §§ 2
, 5, 38 Stat. at 252

– 53, 257 (codified as amended at 12 U.S.C. §§ 222, 282 , 287 )

. T he Federal Reserve Act also allows banks with state charters to convert to national banks , with approval from a majority of shareholder s and

1 The facts discussed herein wer e derived from: the April 14, 2017 Amended Complaint (“Am. Compl.”) and Exhibits (“Am. Compl. Exs. A

– F”); the May 15, 2017 Government’s Appendix (“Gov’t App.”), including the April 5, 2017 Declaration of Philip Jasienczyk, Vice President and Chief Financia l Officer of the Federal Reserve Bank of San Francisco (“Jasienczyk Decl.”); the May 24, 2017 Plaintiffs’ Appendix (“Pl. App.”), including: the May 3, 2017 Declaration of Roy Whitehead, Chairman of Washington Federal, Inc. (“Whitehead Decl.”); the May 19, 2017 Declaration of Brent Beardall, Chief Executive Officer of Washington Federal, Inc. (“Beardall Decl.”) ; and the May 22, 2017 Declaration of James Chessen, Executive Vice President and Chief Economist of the American Bankers Association (“Chessen Decl.” )

.3 the Comptroller of the Currency

. See § 7, 38 Stat. at 258 ( codified as amended at 12 U .S.C. § 321 )

.

T he Federal Reserve Act also provides that

[a] fter all necessary expenses of a Federal [ R ] eserve [ B ] ank have been paid or provided for, the stockholders shall be entitled to receive an annual dividend of six [ percent ] on the paid

- in capital stock, which dividend shall be cumulative.

§ 7, 38 Stat. at 258 (codified as amended at 12 U.S.C. § 289 )

. Since 1913, Congress has amended the Federal Reserve A ct over 200 times , including by the Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103

- 66, 107 Stat. 312 (1993). No change was ever made to the annual dividend rate of six percent.

Section 30 of the Federal Reserve Act, however, “expressly reserved” to Congress the right to “amen d, alter, or repeal” the Federal Reserve Act. See § 30, 38 Stat. at 275, re numbered § 31
, Pub. L. No. 95

- 630, title I, § 101, 92 Stat. 3641 (1978) (codified at 12 U.S.C. § 226 note (2012) (Separability; Right to Amend, Alter or Repeal) ).

B. In 2012, Washington Federal Was Recharter ed As A National Bank And Join ed The Federal Reserve System.

Washington Federal, a federal savings and loan association in Seattle, Washington entered into discussions with representatives of the S tate of Washington and the Federal Reserve Bank of San Francisco (“FRBSF”) in 2011 to learn about the application process to become a chartered bank. White head Decl. ¶¶ 9, 13, 21. 2 Washington Federal was informed by state regulators “ that chartering as a state bank would save Washington Federal nearly $1 million per year” in premiums and regulatory fees. Whitehead Decl. ¶ 11. A s a federally

- chartered savings and loan association, however, Washington Federal was more familiar with the regulators at the Office of the Comptrolle r of the Currency (“OCC”) and believed that investors and prospective customers “perceived the OCC to be the ‘gold standard [.] ’” Whitehead Decl. ¶ 12.

Washington Federal , however, was concerned about the requirement to subscribe to Federal Reserve Bank stock

, “an illiquid, long

- term asset ” that can not be traded, pledged as

c ollateral, or used to acquire other investments . Whitehead Decl. ¶ 1 8

. In addition, at that time, “the Federal Reserve was undergoing an unprecedented change to its own balance shee t, as it had attempted to stabilize the economy from t he recession of the late

- 2000s by acquiring [ certain
assets ] and debt and equity positions . . . as part of responding to the nation’s financial crisis.” Wh i t ehead Decl. ¶ 21. In addition, balance she et changes “materially increase[d] the potential risk of stock ownership in the Federal Reserve System.” Whitehead Decl. ¶ 21. T he Chief Financial Officer of Washington Federal was dispatched to contact the Fede ral Reserve Bank Board to confirm that the Federal Reserve Bank Board “retained the right to demand additional capital

2 Mr. Whitehead was Washington Federal’s Chief Executive Officer and Cha irman of the Board of Directors. Whitehead Decl. ¶ ¶ 2, 11.4 infusions from member banks in the event of a national banking crisis,” but he was assured that the Board had never done so. Whitehead Decl. ¶ 21.

In the end, Washington Federal agreed to become a n ational bank and pay half of the par value of its Federal Reserve Bank stock to the Federal Reserve Bank

, but was required to hold the remaining half in reserve, subject to call by the Federal Reserve Bank

. See 12 U.S.C. § 282 (2012)

. As a result, Washing ton Federal a ssumed a “double liability

, ” i.e.
, a capital call of double the stock’s par value

, or four times the amount that Washington Federal paid f or Federal Reserve Bank stock. Whitehead Decl. ¶ ¶ 20

– 21

. Nevertheless, Washington Federal elected to recharter as a national bank, because “based

on

. . . over one hundred years of precedent,

. . . it was guaranteed a [six percent] return [by the Federal Reserve Bank] on its paid

- in capital stock.” Whitehead Decl. ¶ 23. In addition, t he dividend income would defray the regulatory fees that Washington Federal would have to pay to the OCC

— “ a significant factor [in] recommending that the Board of Directors approve

. . . conversion to a national bank.” Whitehead Decl. ¶ 23.

O n September 24, 2012, the W ashington Federal ’ s Board of Directors unanimously approved of Washington Federal’s conversion. Whitehead Decl. ¶ 24 ; Whitehead Decl. Ex. A (9/24/12 meeting minutes). Thereafter , Washington Federal submitted an application to the OCC
to con ver t that was approved by the OCC on May 29, 2013. 3 Whitehead Decl. ¶ 24.

O n July 8, 2013, Washington Federal submitted an application to FRBSF to purchase Federal Reserve Bank stock

, “in accordance with the provisions of the act of Congress approved December 23, 1913, as amended, and known as the Federal Reserve Act.” Whitehead Decl. ¶ 25; Am. Compl. Ex. A.

On July 17, 2013, the FRBSF ’s Director of District Accounting sent a letter to inform Washington Federal that

W e have processed your application to purchase 479,610 shares of Federal Reserve Bank Stock. This letter is to advise you of the charge of $24,048,444.75 processed on July 17, 2013, for payment amounting to 50% of the par value of the shares of Federal Reserve Bank Stock, plus accrued dividends from July 1, 2013 to July 17, 2013.

* * *

3 Washington Federal ’s parent company, Washington Federal, Inc., also was required to apply to become a bank holding company. Pl. App. at 025 (conversion application) (“[For parent companies other than Bank Holding Companies] Provide a copy of the parent company’s application to become a bank holding company.”) . The application to become a bank holding
company was appr oved on June 5, 2013. Whitehead Decl. ¶ 24.5 Additionally, dividends will be paid semi

- annually on the last business day of June and December. Dividends are paid at the statut ory rate of [six] percent per annum, or $1.50 per share semi

- annually. Dividend payments are documented by an advice that will be mailed to you.

Am. Compl. Ex. B ; Whitehead Decl. ¶ 27

.

C. The Fixing America’s Surface Transportation Act.

On December 4, 20 15, Congress enacted t he FAST Act

. See Pub . L. No. 114

- 94, 129 Stat. 1312 (codified in scattered sections of 5, 7, 12, 15, 23, 31, 42, and 49 U.S.C. (2012 & Supp. III 2016) ). The FAST Act authorized substantial appropriations for surface transportation infrastructure through fiscal year 2020

. See , e.g. , § 3016 , 129 Stat. at 1479 (codified at 49 U.S.C. § 5338 (2012 & Supp. III 2016))

. T o pay for this increased spending, in part, Congress required the Federal Reserve Bank s , effective January 1, 2016, to decrease the dividend paid to member banks with total consolidated assets of more than $10 billion to a variable dividend rate equal to the rate of the 10

- year Treasury note or six percent , whichever is less

. See § 32203 (a) (1)(A)(i), (b) , 129 Stat. at 17 39

– 40 (codified at 12 U.S.C. § 289 (a) & note (2012 & Supp. III 2016))

. 4 Member banks with less than $10 billion in consolidated assets , however, would continue to receive dividends at a six percent annual rate. See § 32203(a)(1)(a)(ii), 129 Stat. at 1740 (codified at 12 U.S.C. § 289 (a)(1)(A)(ii) (2012 & Supp. III 2016))

. The FAST Act also capped the Federal Reserve surplus fund at $10 billion and requir ed that any excess be transferred to the United States Treasury general fund. See § 32202 , 129 Stat.
at 1739 (codified at 12 U.S.C. § 289(a)(3) (2012 & Supp. III 2016)) . This “ increased the risk [of] a call on Washington Federal for additional capital.” Whitehead Decl. ¶ 34.

On December 4, 2015, Washington Federal had assets in excess of $10 billion and owned 479,610 shares of Federal Reserve Bank stock. Am. Compl. ¶ ¶ 2

– 4. The effect of the FAST Act was to decrease Washington Federal’s dividend earnings from $1,439,304 in 2015 to $502,471.43 in 2016. Am. Comp l . ¶ 4. If the dividend rate had not been changed, Washington Federal would have received semiannual dividend earning s of $719,775.00 and $720,230.75, or a total of $1,440,005.75

, in 2016. White head Decl. ¶ 31. In addition

, Washington Federal’s 2016 earnings

were substantially reduced

, as was capital available for commercial or consumer lending and other investments. Whitehead Decl. ¶ 33. Today, Washington Federal considers its Federal Reserve stock as a “dead asset

, ” because it has “ a below market return as well as Federal Reserve [Bank] ‘double liability’ risk, and [Washington Federal] still cannot sell or trade the stock.” Whitehead Decl. ¶ 36.

4 At the time Congress enacted the FAST Act, the rate on a 10

- year Treasury note was 2.304 percent. Am. Compl. ¶ 47.6 II. P ROCEDURAL H ISTORY.

On February 9, 2017, the American Bankers Association (“AB”) 5 and Washington Federal ( collectively “Plainti ffs”) filed a Complaint in the United States Court of Federal Claims

. ECF No. 1 (“Complaint”)

. Count I alleged that the Government breached a “contractual obligation to pay a six percent dividend to Washington Federal and all other member bank [s] ” with assets in excess of $10 billion

. Compl. ¶¶ 70

– 75

. Count II alleged that the Government violated the implied duty of good faith and fair dealing

, by reducing the dividend rate paid to Federal Reserve Bank member stockholders, contrary to the reasonable ex pectations of Washington Federal and other similarly situated member banks

. Compl. ¶¶ 76

– 83

. Count III alleged that the Government violated the Taking Clause of the Fifth Amendment to the United States Constitution “by causing the Federal Reserve Banks t o pay a dividend that is less than six percent,” thereby “depriv[ing] Washington Federal and other member bank stockholders of the value of their investments in Federal Reserve Bank stock. ” Compl. ¶¶ 84

– 92

. On February 16, 2017

, the parties submitted a Jo int Preliminary Status Report. ECF No. 6. On March 1, 2017, the court convened a Status Conference to discuss an efficient way to proceed. On March 7, 2017, the court issued a Scheduling Order that established the briefing schedule. ECF N o. 14

.

On April 7, 2017, the Government filed a Motion To Dismiss

, pursuant to Rules of the United States Court of Federal Claims (“RCFC”) 12(b)(1) and (6)

, and a Motion For Summary Judgment , pursuant to RCFC 56 . ECF No. 19.

On April 14, 2017

, Plaintiffs filed an Amended Complaint that referred to the purchase of Federal Reserve Bank stock as a “ subscription

, ” changed some of the dates in the factual allegations, and added a breach of an implied

- in

- fact contract claim

. ECF No. 20 (“Am. Compl.”)

. On May 15, 2017, the Government filed a Motion To Dismiss T he April 14, 2017 Amended Complaint (“Gov’t Mot.”)

, arguing that : 1) there was no express or implied contract between the Government and Plaintiffs

, or , in the alternative, the Government had no co ntractual obligation to
pay Plaintiffs a six percent dividend rate in perpetuity; 2 ) the Government had no duty of good faith and fair dealing, independent of a contractual relationship with Plaintiff s ; and 3 ) Plaintiffs have no cognizable private property i nterest in a specific dividend rate or , in the alternative, the Government’s actions did not effect a taking. ECF No. 25; Gov’t Mot. at 11

– 12.

On May 24, 2017, Plaintiffs filed a Response to the Government’s Motion To Dismiss

. ECF No. 27 (“Pl. Resp.”)

. On June 22, 2017, the Government filed a Reply to Plaintiff’s May 24
, 2017 Response. ECF No. 34 (“Gov’t Reply”).

On July 27, 2017, the court heard oral argument on the Government’s May 15, 2017 Motion To Dismiss and Plaintiff s ’ May 24, 2017 Response ( “TR 1

– 130”)

.

5 The court herein refers to plaintiff A merican Bankers Association as “AB” to distinguish it from the American Bar Association, known as the ABA.7 III. DISCUSSION.

A. Jurisdiction.

The United States Court of Federal Claims has jurisdiction under the Tucker Act, 28 U.S.C. § 1491, to adjudicate “any claim against the United States founded either upon the Constitution

, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.” 28 U.S.C. § 1491(a)(1) (2012) (emphasis added). The Tucker Act, however, is “a jurisdictional statute; it does not create any substantive right enforceable against the United States for money damages

. . . . [T]he Act merely confers jurisdiction upon [the United States Court of Federa l Claims] whenever the substantive right exists.” United States v. Testan , 424 U.S. 392, 398 (1976).

To pursue a substantive right under the Tucker Act, a plaintiff must identify and plead an independent contractual relationship, Constitutional provision , federal statute, and/or executive agency regula tion that provides a subst antive right to money damages. See Todd v. United States

, 386 F.3 d 1091, 1094 (Fed. Cir. 2004) (“[J]urisdiction under the Tucker Act requires the litigant to identify a substantive right for money damages against the United States, separate from the Tucker Act[.]”). Specifically, a plaintiff must demonstrate that the source of substantive law upon which he relies “can fairly be interpreted as mandating compensation by the Federal G overnment. ” United States v. Mitchell , 463 U.S. 206, 216

– 17 (1983) (quoting Testan , 424 U.S. at 400). Plaintiff must also make “a nonfrivolous allegation that [he] is within the class of plaintiffs entitled to recover under the money

- mandating source.” Jan’s Helicopter Serv., Inc. v. F.A.A. , 525 F.3 d 1299, 1309 (Fed. Cir. 2008).

In a brea ch of contract case, “the money

- mandating requirement for Tucker Act jurisdiction normally is satisfied by the presumption that money damages are available for breach o f contract, with no further inquiry being necessary.” Holmes v. United States , 657 F.3d 1303, 1314 (Fed. Cir. 2011). A “well

- pleaded allegation” of an express or implied

- in

- fact contract “is sufficient to overcome challenge s to jurisdiction.” Trauma Ser v. Grp

. , Inc. v. United States , 104 F.3 d 1321, 1325 (Fed. Cir. 1997). In addition, it is well established that the “Taking [] Clause of the Fifth Amendment is a money

- mandating source for purposes of Tucker Act jurisdiction.” Jan’s Helicopter Serv. , 525 F.3d at 1309 (citing Moden v. United States , 404 F.3d 1335, 1341 (Fed. Cir. 2005)).

For these reasons, the court has determined that it has jurisdiction to adjudicate Counts I, II, and III of the April 14, 2017 Amended Complaint , pursuant to RCFC 1 2(b)(1)

.

B. Standing.

1. Regarding The American Bankers Association.

a. The Government’s Argument.

The AB is not in privity of contract with the Government. Gov’t Mot. at 15. Nor does the AB have standing to seek an adjudication of a T aking Clause c laim

, bec ause the April 14, 2017 Amended C omplaint does not allege a property interest or investment

- backed expectation that was8 adversely affected by the decreased dividend rates required by the FAST Act . Gov’t Mot. at 16. Nor can the AB satisfy the requirements of associational standing . Gov’t Mot. at 17

– 18. In addition

, the April 14, 2017 Amended Complaint requests damages that run only to member banks

, not the AB

. Gov’t Mot. at 17.

b. Plaintiffs’ Response.

Plaintiffs respon d that the AB should be afforded associational standing and allowed to represent member banks in this suit

, because the individual contracts between member banks and the Federal Reserve Banks are similar or identical. Pl. Resp. at 47

– 48. Some sixty

- six AB member banks have a contract with the Federal Reserve Bank, and each owns a different amount of Federal Reserve Bank stock, such that each suffered a different monetary loss. Chessen Decl. ¶¶ 4

– 7. But, each member bank experienced the same percentage reduction in dividen d rates under the FAST Act. Pl. Resp. at 48. As such , the AB ’s breach of contract claim concern s questions of law that do not require an individualized, fact

- intensive inquiry. Pl. Resp. at 48.

In the alternative, the court should defer ruling on the AB ’s standing

, because Washington Federal seeks t o establish a class action and there may be no need to reach the issue of the AB ’s standing

. Pl. Resp. at 46. In addition, this issue can be adjudicated after additional discovery is conducted to determine t he exact amount of financial harm suffered by each member bank. Pl. Resp. at 46

– 47.

c. The Court’s Resolution.

“[S]tanding is a threshold jurisdictional issue.” Myers Investigative & Sec. Servs., Inc. v. United States , 275 F.3d 1366, 1369 (Fed. Cir. 2002). T he standing requirements

, derived from Article III of the United States Constitution, also apply to the United States Court of Federal Claims. See Starr Int’l Co. v. United States , 856 F.3d 953, 964 (Fed. Cir. 201 7) (quoting Anderson v. United States , 344 F.3d 1343, 1350 n.1 (Fed. Cir. 2003) ( holding that the United States Court of Federal Claims, “ though an Article I court, . . . applies the same standing requirements enforced by other federal courts created unde r Article III.” ) )

, petition for cert. filed , No. 17

- 540 (Oct. 11, 2017)

. Therefore

, a plaintiff must establish “an injury

- in

- fact that is both fairly traceable to the challenged conduct of the defendant and likely redressable by a favorable judicial decis ion.” Figueroa v. United States , 466 F.3d 1023, 1029 (Fed. Cir. 2006). In addition, t he party invoking jurisdiction bears the burden of establishing constitutional standing. See Myers Investigative , 275 F.3d at 1369 (quoting Lujan v. Def s . of Wildlife

, 504 U.S. 555, 561 (1992) (“[T]he party invoking federal jurisdiction bears the burden of establishing [its] elements.”) )

. The United States Supreme Court has held that a n association may file a complaint on behalf of members

, when three elements are satisfied: “(a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requi res the participation of individual members in the lawsuit.” Hunt v. Wash. State Apple Adver. Com m’ n , 432 U.S. 333, 342

– 43 (1977). An association fails to meet the third requirement

, if either the claim asserted or the relief requested requires “individu alized proof” as to each association member. Id

. at 344. S pecifically

, where damage s claims are alleged, the third Hunt element has “been understood to preclude associational standing when an organization seeks damages on behalf of9 its members

, ” but no monetary injury has been incurred by the association nor assignment of the damages claims by its members. See United Food And Commercial Workers Union Local 751 v. Brown Grp

. , Inc. , 517 U.S. 544, 554 (1996); see also Warth v. Seldin , 422 U.S. 490, 515

– 16 (1975) (holding that an association may not file a suit seeking damages on behalf of its members whe re the damages are peculiar to each member, requiring “individualized proof” of “both the fact and extent of injury”).

Although the AB argue s that the court should defer ruling on whether it has standing, the United States Supreme Court has held that

, when a plaintiff’s standing is challenged , “exercise of its power by a federal court would be gratuitous and thus inconsistent with the Art [ icle ] III limitation.” Simon v. E

. Ky

. Welfare Rights Org

. , 426 U.S. 26, 38 (1976)

.
In this case , the AB alleged that some sixty

- six member banks have a contract with the Federal Reserve Bank

, but each own s a different amount of Federal Reserve Bank stock and experienced different amounts of monetary loss

, as a result of the implementation of the FAST A ct . N evertheless, the AB insist s that individualized proof is not needed

, because each member bank had an equal reduction in dividend receipts

. It may be true that the net decrease in dividend receipts may differ

, because each AB member purchased a different amount of stock when it joined the Federal Reserve System

. But, the April 1 4 , 2017 Amended Complaint did not allege that the AB suffered individual monetary injury n or did it allege that any member bank assigned to the AB the right to recover damages on their behalf

. See Warth , 422 U.S. at 515

– 16 (holding that associations lack standing in a suit for damages

, when th ey are not incurred “in equal degr ee” by all members and require individualized proof ).

For these reasons, the court must and has determined that the AB does not have standing to seek an adjudication of the claims alleged in the April 1 4 , 2017 Amended Complaint. See Rothe Dev. Corp. v. Dep’t of Def. , 413 F.3d 1327, 1334 (Fed Cir. 2005) ( “[S]tanding is to be determined as of the commencement of the suit.” ) ( citing Lujan , 504 U.S. at 570 n.5 ).

2. Regarding Washington Federal, N.A.

The United States Supreme Court has held that “the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues.” Warth , 422 U.S. at 498 . Specifically, “a plaintiff must show [that] it has suffered an ‘injury in fact’ that is . . . concr ete and particularized and . . . actual or imminent, not conjectural or hypothetical; . . . the injury is fairly traceable to the challenged action of the defendant; and . . . it is likely, as opposed to merely speculative, that the injury will be redresse d by a favorable decision.” Friends of the Earth, Inc. v. Laidlaw Envtl. Serv s ., Inc. , 528 U.S. 167, 180

– 81 (2000) (internal citations omitted). In determining whether a plaintiff has standing to pursue an action, the court “must accept as true all mater i al allegations of the complaint, and must construe the complaint in favor of the complaining party. ” Warth , 422 U.S. at 501.

The April 1 4 , 2017 Amended Complaint alleges that Washington Federal ’s dividends decreased from $1,439,304 in 2015 to $502,471 in 2016 or a $936,833 loss. Am. Compl. ¶ 4. T hat loss is concrete, particularized, and fairly traceable to the implementation of the FAST A ct

. In addition, that loss and subsequent financial injury can be redressed by a monetary judgment

.10 For these reas ons, the court has determined that Washington Federal has standing to seek an adjudication of the claims alleged in the April 14, 2017 Amended Complaint.

C. The Amended Complaint Fails to Satisfy the Requirement s of RCFC 12(b)(6).

In this case, Counts I and II of the April 14, 2017 Amended Complaint, as previously described, allege all of the elements of a breach of contract case. Am. Compl. ¶¶ 74

– 87. Count III alleges that Plaintiffs had contractual and statutory rights to a six percent dividend, that are private property and subject to the Taking Clause of the Fifth Amendment to the United States Constitution

. Am. Compl. ¶¶ 88

– 96.

The parties have devoted a substantial amount of effort arguing about whether Washington Federal had a contractual relationshi p with the Federal Reserve Bank and, if so, whether Congress can change the terms of that contract by legislation. In the court’s judgment, th e parties overlooked the dispositive fact that s ection 31 of the Federal Reserve Act states: “ T he right to amend, alter, or repeal this act is hereby expressly reserved.” Pub. L. No. 63

- 43, ch. 6, § 30, 38 Stat. at 275 (1913), renumbered § 31
, Pub. L. No. 95

- 630, title I, § 101, 92 Stat. 3641 (1978) (codified at 12 U.S.C. § 226 note (2012) (Separability; Right to A mend, Alter or Repeal) )

.
In short , the Federal Reserve Act conferred no right to Washington Federal or any other holder of Federal Reserve Bank stock to receive a dividend at any rate certain that Congress could not amend, change, or even eliminate. See B owen v. Pub

. Agencies Opposed to Soc

. Sec

. Entrapment , 477 U.S. 41, 48

– 49 , 54 (1986) (“ POSSE ”) (holding that no right could be conferred by an agreement between the State of California and the Department of Health and Human Services concerning social security payments paid to certain state employees “beyond that in [the statute] itself” ).

The effect of an express reservation of rights has been “ settled since the Sinking

- Fund Cases .” POSSE , 477 U.S. at 53 (citing Sinking

- Fund Cases , 99 U.S. (9 Otto) 700 (1879) ) . In the
statutes at issue in th o se cases, Congress reserved the power to amend, alter, or repeal

— and exercised that power. As t he United States Supreme Court explained

, “Congress not only retains, but has given special notice of its intention to retain, full and complete power to make such alterations and amendments as come within the just scope of legisla tive power.” Sinking

- Fund Cases
, 99 U.S. at 720. That includes the “ performance of contracts already entered into.” POSSE
, 477 U.S. at 53

– 54 (citing Sinking

- Fund Cases , 99 U.S. at 721). The Federal Reserve Act does not reflect that Congress intended to abdicate the right to change the dividend rate; instead , Congress expressly reserv ed the right to amend, alter, or repeal an y provision of the Act at will, including that of the dividend rate

.
Nor does t he Federal Reserve Act convey a contractual or statutory right to a six percent dividend. See Nat ’ l R.R. Passenger Corp. v. Atchison

, Topeka & Santa Fe Ry. , 470 U.S. 451, 467 ( 1985) ( “Legislation outlining the terms on which . . . parties may execute contracts does not on its own constitute a statutory contract, but is instead an articulated policy that, like all statutory policies, is s ubject to revision or repeal.”)

. The Unit ed States Supreme Court has held that contracts, “including those to which a sovereign itself is a party, ‘remain subject to subsequent legislation by the sovereign.’” POSSE , 477 U.S. at 52 (quoting Merrion v. Jicarilla Apache Tribe

,11 455 U.S. 130, 147 (19 82)). In this case, the fact that Congress did not change the dividend rate, despite amending the Federal Reserve A ct over 200 times, is irrelevant: “[S]overeign power, even when unexercised, is an enduring presence that governs all contracts subject to the sovereign’s jurisdiction, and will remain intact unless surrendered in unmistakable terms.” Merrion , 455 U.S. at 148. Moreover , where Congress expressly reserves the right to amend, alter, or repeal legislation , such statutory text “is hardly the language of contract.” Nat’l R.R. Passenger Corp

. , 470 U.S. at 467. In this case, t he dividend rate “simply cannot be viewed as conferring any sort of ‘vested right’ in the face of precedent concerning the effect of Congress’ reserved pow er on agreements entered into under a statute containing the language of reservation.” POSSE , 477 U.S. at 55

.
Nevertheless , Washington Federal insists that the Government must pay damages to those who joined the Federal Reserve System

, before the FAST Act was enacted. Pl. Resp. at 30 (citing United States v. Winstar Corp. , 518 U.S. 839, 871 (1996)). In the Winstar cases, the financial institutions that acquired failed banks specifically were allowed by federal regulation to use “the purchase method o f accounting under which ‘supervisory goodwill’ resulting from the merger would be treated as satisfying part of the merged thrift’s regulatory requirements.” Winstar Corp. v. United States , 64 F.3d 1531, 1535 (1995) ( en banc ), aff’d , 518 U.S. 839 (1996). “Another incentive was the use of ‘capital credits’ that also could be counted toward the regulatory capital requirements.” Id . Subsequently, Congress disallowed the use of these accounting methods to satisfy capital requirements. Id. at 1538. But, i n the Winstar cases, the merger documents contained specific reference to “purchase method of accounting,” “supervisory goodwill,” and “capital credits,” terms considered as “essential reliance.” See Winstar , 518 U.S. at 868

– 69 (“‘[The parties] were contr actually bound to recognize the supervisory goodwill and the amortization periods reflected’ in the agreements . . . . ‘Such an agreement . . . is usually interpreted as one to pay damages if performance is prevented rather than one to render a performance in violation of law.’”) (citing Winstar , 64 F.3d at 1541

– 42; R ESTATEMENT (S ECOND ) OF C ONTRACTS § 264 cmt. a ( A M

. L AW I NST

. 1981)). In this case, the July 17, 2013 Advice of Holdings contained no language about dividends or any dividend rate (Court Exhibi t A) and the July 17, 2013 acceptance letter states only that dividends will be “paid at the statutory rate,” which as of that date was “[six] percent per annum, or $1.50 per share semi

- annually” (Court Exhibit B). And, after January 1, 2016, when the FAS T Act’s dividend changes became effective, Washington Federal received the “statutory rate” effective at that time.

W hen a complaint alleges that a plaintiff’s private property has been taken without just compensation, the court first must determine whet her the plaintiff has a cognizable property interest. See Huntleigh USA Corp. v. United States , 525 F.3d 1370, 1377 (Fed. Cir. 2008). If the plaintiff has a cognizable property interest, the court turns to whether the government action amounted to a comp ensable taking of that property interest. Id. at 1378 (quoting Am. Pelagic Fishing Co., L.P. v. United States , 379 F.3d 1363, 1372 (Fed. Cir. 2004)). But, if the plaintiff fails to demonstrate the existence of a cognizable property interest, “the court’s task is at an end.” Am. Pelagic Fishing , 379 F.3d at 1372.

Washington Federal’s April 14, 2017 Amended Complaint asserts that it has a “private property interest[]” in “contractual and statutory rights to receive a six percent dividend on Federal Reser ve Bank stock and in [Washington Federal’s] capital investments in Federal Reserve Bank stock.” Am. Compl. ¶ 90. If Washington Federal , however, had no contractual right to a six12 percent dividend, ipso facto it has no property interest in a six percent d ividend rate

. Assuming arguendo that the court concluded Washington Federal had a contractual right to a six percent dividend rate, the remedy for a breach of contract is damages ; no taking can occur , so long as that remedy exists

. See La Van v. United States , 382 F.3d 1340, 1352 (Fed. Cir. 2 004) ( “This court has consistently reaffirmed . . . binding precedent [] [rejecting a Taking Clause claim where the plaintiff retains ‘the full range of remedies associated with a ny contractual property right

. ’ ]” )

. I n other words, a taking of a contractual property right only occurs

, if the remedy for vindicating that right by legal process is eliminated. Id. ; see also Castle v. United States , 301 F.3d 1328, 1342 (Fed. Cir. 2002) (holding that there was no taking of a contractual right where the governmental action “did not deprive the plaintiffs from a contractual remedy”); Bailey v. United States , 341 F.3d 1342, 1347 (Fed. Cir. 2003) (same).

Property interests are “created and their dimensions are defined by exist ing rules or understandings that stem from an independent source such as state law.” Webb’s Fabulous Pharmacies, Inc. v. Beckwith , 449 U.S. 155, 161 (1980) (citing Bd

. of Regents v. Roth , 408 U.S. 564, 577 (1972)). But a “ mere unilateral expectation or a n abstract need is not a property interest entitled to protection.” Id. ; see also Zucker v. United States , 758 F.2d 637, 639

– 40 (Fed. Cir. 198 5) (“[C]ourts have consistently refused to give effect to government

- fostered expectations that, had they arisen in the private sector, might well have formed the basis for a contract or an estoppel. . . . Such an ‘expectation’ does not rise to the level of ‘property’ protected by the taking [] clause.”).

The Federal Reserve Act provides that

, “[a]fter all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders shall be entitled to receive an annual dividend of six [ percent ] on the paid

- in capital stock, which dividend shall be cumulative.” § 7, 38 Stat. a t 258 ( codified as amended at 12 U.S.C. § 289 ) . A cumulative dividend is one “that grows from year to year when not paid . . . [ i.e. ,] [i]f the corporation does not pay a dividend in a particular year or period, it is carried over to the next year or peri od and must be paid before the common share holders receive any payment.” Cumulative Dividend

, B LACK ’ S L AW D ICTIONARY 580 (10 th e d. 2014). That the Act uses the term “entitled” in describing the relationship between the member banks and the dividend does not equate the dividend rate to a property right. In 1913
, Congress found that a six percent dividend was a “ fair ” return. 6 But, in reserving the right to

6 T he polic y underlying the ini tial six percent dividend rate is found in the R eport of the Senate Committee on Banking and Currency:

The policy of limiting the dividends . . . is based upon the theo ry that these great public utility banks are not intended to be merely money

- making banks, but that they are guardians of the public welfare . . . [they] will also be charged with the duty of protecting the national gold reserve, protecting the national co mmerce, and transportation enterprises of the United States. For this reason, these banks ought to have no other motive than the public welfare, and the moving policy of the banks should not be to earn as much dividends as the commerce of the country coul d endure, but to protect our national commerce and our national

- banking system at a fair profit.

S. R EP

. N O

. 63

- 133
, at 10

– 11 (1913).13 amend, alter, or repeal any portion of the Federal Reserve Act, Congress maintained the right to

re visit that dividend rate

. See § 30, 38 Stat. at 275 (1913), renumbered § 31
, Pub. L. No. 95

- 630, title I, § 101, 92 Stat. 3641 (1978) (codified at 12 U.S.C. § 226 note (2012) (Separability; Right to Amend, Alter or Repeal) )

. Thus, Washington Federal had only a “mere unilateral expectation ” of a six percent dividend, “not a property interest.” Webb’s Fabulous Pharmacies , 449 U.S. at 161.

Finally

, Federal Reserve Bank stock cannot be sold or transferred. See § 5, 38 Stat. at 257 (codified as amended a t 12 U.S.C. § 287). T his in an important factor in determining whether Washington Federal had a property right to a six percent dividend since the United States Court of Appeals for the Federal Circuit has held: “[The] absence of crucial indicia of a prop erty right [ i.e.
, the ability to assign, sell, or transfer that right], coupled with the government’s irrefutable retention of the right to suspend, revoke, or modify [that right] compels the conclusion that [there was no] property right.” Am. Pelagic Fis hing , 379 F.3d at 1374

. For these reasons, the court has determined that

, although Washington Federal had an expectation that it would continue to receive an annual six percent dividend on its Federal Reserve Bank stock, it did not have a cognizable private property interest subject to the Taking C lause of the Fifth Amendment to the United States Constitution

. In examining a motion to dismiss under RCFC 12(b) (6)

, the court must accept as true all of the allegations contained in a complaint, but is not “bound to accept as true a legal conclusion couched as a factual allegation

. ” Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007) (inter nal quotation marks omitted)

. Washington Federal alleges that it had contractual and statutory property right s to a six percent dividend, and that the failure to pay dividends at that rate amounted to a breach of contract , or, alternat ively, a taking of a compensable property interest under the Taking Clause of the Fifth A mendment to the United States Constitution. The court has determined, however, that a s a matter of law, Washington Federal, individually and on be half of other national bank s similar ly situated, had neither a contractual

, statutory , nor property right to a six p ercent dividend rate that would entitle it to relief

.

IV. CONCLUSION.

For the se reasons, the Government’s May 15, 2017 Motion To Dismiss is granted; the April 14, 2017 Amended Complaint is dismissed

. The Clerk of the United States Court of Federal Claims is directed to enter judgment accordingly.

IT IS SO ORDERED. s/ Susan G. Braden SUSAN G. BRADEN Chief Judge

# COURT EXHIBIT A

# COURT EXHIBIT B