b"State Bar Disciplinary Rules\nAs Applied to Federal Government Attorneys\nThe purported imposition o f exclusive disciplinary jurisdiction by state courts upon federal\nlawyers acting in the scope o f their federal authority is subject to the overriding requirements\no f the Supremacy Clause. Rules promulgated by state courts or bar associations that are\ninconsistent with the requirements or exigencies of federal service may violate the Supremacy\nClause.\nAlthough Department of Justice authorization statutes have im plicitly recognized that federal\nattorneys may be subject to reasonable conditions of state bar membership and to state ethical\nrules of general application, the imposition of state rules o f conduct which penalize or\ninterfere with the performance of authorized federal responsibilities is not recognized or\napproved by such statutes.\nTo the extent that a proposed state bar rule asserting \xe2\x80\x9cexclusive\xe2\x80\x9d disciplinary jurisdiction implies\nan exclusive right to judge the conduct o f federal attorneys by state ethical standards, to\nimpose state sanctions, or to displace any federal forum, it would raise serious issues under\nthe Supremacy Clause.\n\nAugust 2, 1985\nM\n\nem o ran d um\n\nE x e c u t iv e O f f ic e\n\nO\n\np in io n f o r t h e\n\nfo r\n\nD ir e c t o r ,\n\nU n it e d S t a t e s A t t o r n e y s\n\nThis responds to your request that we review the proposed amendments to\nthe Code of Professional Responsibility and Rules of Disciplinary Enforce\xc2\xad\nment of the Alabama State Bar.\nParagraph 4 o f the proposed amendments states:\nAny attorney admitted to practice law in this state, including\nDistrict Attorneys, Assistant District Attorneys, United States\nAttorneys, Assistant United States Attorneys, the Attorney Gen\xc2\xad\neral, Assistant Attorneys General, and any attorney specially\nadmitted by any court in this state for a particular proceeding is\nsubject to the exclusive disciplinary jurisdiction o f the Supreme\nCourt of Alabama and the Disciplinary Board o f the Alabama\nState Bar, hereafter established.\nYou have indicated that the language of paragraph 4 of the proposed amend\xc2\xad\nments is ambiguous in its application to Assistant Attorneys General within the\nDepartment. For purposes o f this discussion, we have assumed that the pro\xc2\xad\nposed amendment is intended to apply to those individuals, as well as to the\nAttorney General of the United States.\n71\n\n\x0cThe imposition o f exclusive disciplinary jurisdiction by a state court upon\nfederal lawyers acting in the scope of their federal authority must be assessed in\nlight of the Supremacy Clause.1 In a prior memorandum entitled \xe2\x80\x9cDisqualifica\xc2\xad\ntion o f Prosecutor Because of Form er Representation,\xe2\x80\x9d 9 Op. O.L.C. 1 (1985),\nwe advised you that the Department of Justice has regularly maintained that\nrules prom ulgated by state courts or bar associations that are inconsistent with\nthe requirements or exigencies o f federal service may offend the Supremacy\nClause o f the Constitution. See Sperry v. Florida, 373 U.S. 379 (1963) (where\nCongress and the Executive had authorized nonlawyers to practice before the\nUnited States Patent Office, the State of Florida could not prohibit such\nconduct as the unauthorized practice of law). In this regard, this Office has\nconcluded that a Department attorney, acting under Departmental authority in\nan undercover operation, cannot be guilty of violating state ethical rules \xe2\x80\x9cif his\nacts are authorized by federal law, including the Department\xe2\x80\x99s regulations\nprescribing ethical standards,\xe2\x80\x9d ju st as a federal employee, under appropriate\ncircum stances, may perform authorized federal functions without regard to the\nlimits o f state criminal law. See Memorandum for Thomas P. Sullivan, United\nStates Attorney for the Northern District o f Illinois from Mary C. Lawton,\nDeputy Assistant Attorney General, Office o f Legal Counsel 14 (Aug. 1, 1978)\n(citing In re N eagle, 135 U.S. 1, 75 (1890)).\nThe activities o f the federal government are presumptively free from state\nregulation, unless Congress has clearly authorized state regulation in a specific\narea. See H ancock v. Train, 426 U.S. 167, 178-79 (1976). State laws or court\nrules regulating the conduct of employees o f the United States in the perfor\xc2\xad\nmance o f their official duties constitute regulation of the activities of the\nfederal government itself and are therefore also presumptively invalid under\nthis rule. In the area of professional conduct, however, Congress has directed\nthat Justice Department attorneys must be licensed and authorized to practice\nunder the laws o f a state, territory, or the District of Columbia.2\nIn prior interpretations of that requirement, the Department has been willing\nto assume that Congress \xe2\x80\x9cintended that the attorneys would be subject to\nreasonable conditions o f continued bar membership where those conditions are\nnot inconsistent with the requirements or exigencies o f federal employment,\xe2\x80\x9d\nand that Congress could reasonably have intended federal employees to be\nsubject to \xe2\x80\x9creasonable and established ethical rules for the bar generally.\xe2\x80\x9d\nM emorandum o f the Department o f Justice, \xe2\x80\x9cIn the M atter of the Petition of the\nBoard o f Governors o f the District of Columbia Bar\xe2\x80\x9d 5 (Sept. 11,1979). On the\n1U .S. C onst, art. VI, cl. 2 provides: \xe2\x80\x9cThis C onstitution, and Law s o f the U nited States which shall be made\nin P ursuance th e r e o f . . . shall be the supreme Law o f the Land; and the Judges in every State shall be bound\nthereby, an y T hing in the C onstitution or L a w s o f any State to the Contrary notw ithstanding.\xe2\x80\x9d\n2 D epartm ent o f Justice authorization and appropriations statutes routinely provide that the D epartm ent's\nfund s m ay not be used to pay the com pensation o f any person employed as an attorney unless that person is\ndu ly licensed and authorized to practice as a n attorney under the laws o f a state, territory, or the D istrict of\nC olum bia. See, e.g .. Pub. L. No. 96-132, \xc2\xa7 3 (a), 93 Stat. 1040, 1044 (1979); Pub. L. No. 95-324, \xc2\xa7 3(a), 92\nStat. 3459, 3462 (1978); Pub. L. No. 95 -8 6 , \xc2\xa7 202, 91 Stat. 419, 428 (1977); see also Pub L. No. 9 8 ^ 1 1 ,\n\xc2\xa7 203(a), 98 Stat. 1545, 15 5 8 -5 9 (1984) (continuing the requirem ent o f \xc2\xa7 3(a) of Pub. L. No. 96-132).\n\n72\n\n\x0cother hand, we do not believe that Congress\xe2\x80\x99 mandate to state and local bar\nassociations extends to the imposition of rules of conduct that penalize or\notherwise interfere with the performance of authorized federal responsibilities.\nNor do we believe that Congress could have intended to allow the fifty states,\nthe territories, or the District of Columbia to develop special rules for Federal\nattorneys. See, e.g., id. at 5-6; Memorandum o f the Department o f Justice, Re:\n\xe2\x80\x9cReport of the New Jersey Supreme Court Committee on the Model Rules of\nProfessional Conduct\xe2\x80\x9d (Nov. 8,1983). Thus, pursuant to the Supremacy Clause,\nthe Department has opposed attempts by state bars to impose special obliga\xc2\xad\ntions or disabilities on federal attorneys.\nThe Department has consistently reserved the prerogative to determine the\nappropriate course of conduct for federal attorneys faced with a conflict be\xc2\xad\ntween their official duties and state regulation. The decision to authorize a\nDepartment attorney to take action inconsistent with a relevant state bar stan\xc2\xad\ndard, which may subject that attorney to state disciplinary proceedings, will be\nmade only after careful consideration of the surrounding circumstances. The\nDepartment\xe2\x80\x99s standard of conduct is not automatically given preference over\nany state bar standard without regard to the relative importance o f the conflict\xc2\xad\ning standards. Rather, we generally reserve reliance on the Supremacy Clause\nfor those occasions when a state bar standard impedes the authorized functions\nof the Attorney General and the Department o f Justice, so that the Department\ncannot adequately carry out its functions if it adheres to the state standard.\nThus, in view of the above discussion, whether or not the Alabama rule\noffends the Supremacy Clause could depend on the facts of particular cases\ninvolving federal lawyers and whether state or federal standards are applied in\nthe state disciplinary proceeding. We are not certain, however, what is meant\nby \xe2\x80\x9cexclusive\xe2\x80\x9d disciplinary jurisdiction. To the extent that state jurisdiction\nmay be asserted in a manner that does not impede the functions o f the Depart\xc2\xad\nment, we cannot say that this proposed amendment absolutely violates the\nConstitution. Yet, if the assertion o f \xe2\x80\x9cexclusive\xe2\x80\x9d disciplinary jurisdiction is\nintended to imply an exclusive legal right to judge the conduct of federal\nattorneys by state ethical standards, to impose appropriate state sanctions, and\nto displace any federal forum, the proposed amendment raises a serious issue\nunder the Supremacy Clause.\nRa lph W . T arr\n\nActing Assistant Attorney General\nOffice o f Legal Counsel\n\n73\n\n\x0c"


b'September 1, 1978\n\n78-48\n\nMEMORANDUM OPINION FOR THE CHIEF,\nTORTS SECTION, CIVIL DIVISION\nTrade Secrets\xe2\x80\x94 Federal Food, Drug, and Cosmetic Act\n(21 U .S.C . \xc2\xa7 331)\xe2\x80\x94 Disclosure\xe2\x80\x94 Swine Influenza\nImmunization Program (42 U .S.C . \xc2\xa7 2746)\n\nThis responds to your request for our opinion whether the Department may\nrelease to a court trade secret information entitled to protection under \xc2\xa7 301 of\nthe Federal Food, Drug, arid Cosmetic Act, 21 U.S.C. \xc2\xa7 331 (j), where the\nmanufacturers owning the trade secrets consent to such release. The Depart\xc2\xad\nment is defending certain personal injury and wrongful death actions arising out\nof the National Swine Influenza Immunization Program of 1976. See 90 Stat.\n1114, 42 U.S.C. \xc2\xa7 247b(k)(l)(A)(ii), which provides that the exclusive remedy\nunder this program shall be against the United States. These actions have been\nconsolidated for pretrial discovery purposes and are pending in the United\nStates District Court of the District of Columbia. A relevant issue in the\nlitigation will be the ingredients and manufacturing processes of the vaccine.\nThe vaccine manufacturers claim that some of this information involves trade\nsecrets.\nThe court has issued a protective order requiring that documents involved in\nthis iitigation be used for no other purpose. The order further provides that the\ndocuments or any information contained therein shall not be disclosed to\nanyone other than the attorneys and persons assisting them in litigation. Subject\nto the conditions in the protective order, the vaccine manufacturers have\nconsented to use of the. information in the litigation.\nYou ask whether the Department may, in light of \xc2\xa7 301 (j), release in\ndiscovery proceedings documents containing trade secret information acquired\nunder the authority of the Federal Food, Drug, and Cosmetic Act. Section\n301(j), 21 U.S.C. \xc2\xa7 33l(j), reads, in pertinent part, as follows:\nThe following acts and the causing thereof are hereby prohibited:\n*****\n(j) The using by any person to his own advantage, or revealing,\nother than to the Secretary or officers or employees of [the Depart\xc2\xad\nment of Health, Education and Welfare] when relevant in any judicial\nproceeding under this Act, any information acquired under authority\n193\n\n\x0cof sections 404, 409, 505, 506, 507, 510, 512, 513, 514, 515, 516,\n518, 519, 520, 704, 706, or 708 of this title concerning any method\nor process which as a trade secret is entitled to protection.\nIt is conceded that the pending judicial proceeding is not one under the Federal\nFood, Drug, and Cosmetic Act. However, we believe that the Department may\nrelease the documents in question in the pending litigation.\nThe intention of \xc2\xa7 301 (j) is solely to protect the manufacturers\xe2\x80\x99 interests in\ntheir trade secrets and it is tied to their interest of maintaining the protection to\nwhich the trade secrets are entitled. A manufacturer can waive his right to this\nprotection. The legislative history of \xc2\xa7 301(j) shows that it was designed as a\n\xe2\x80\x9c safeguard to the property rights of manufacturers by making [a crime] the\nunauthorized use or disclosure of any information. . .concerning any method or\nprocess which is entitled to protection in equity as a trade secret.\xe2\x80\x9d S. Rept. No.\n493, 73d Cong., 2d sess. 18, 21 (1934). This is consistent with the terms of\n\xc2\xa7 301 (j) barring disclosure of only the information relating to trade secrets that\nis \xe2\x80\x9c entitled to protection.\xe2\x80\x9d Other than protecting the manufacturers\xe2\x80\x99 proprie\xc2\xad\ntary interest, there is no general societal value in keeping this information\nconfidential.\nAs mentioned above, \xc2\xa7 301(j) only bars disclosure of such trade secrets\ninformation as is \xe2\x80\x9c entitled to protection.\xe2\x80\x9d This entitlement runs to the owner of\nthe trade secret who may waive it entirely or in part. See, Kewanee Oil Co. v.\nBicron Corp., 416 U.S. 470 (1974); Underwater Storage, Inc. v. United\nStates Rubber C o., 371 F. (2d) 950 (D.C. Cir. 1966), cert, denied, 386 U.S.\n911 (1967). Thus, the \xe2\x80\x9c entitled to protection\xe2\x80\x9d element of \xc2\xa7 301 (j) is deter\xc2\xad\nmined by the intent and legitimate interests of the owner of a covered trade\nsecret. Accordingly, the owner may consent to a limited waiver in the pending\nlitigation, thereby permitting the disclosure of the information to be used\ntherein. Cf., Plastic & M etal Fabrications, Inc. v. Roy, 163 Conn. 257, 303 A.\n2d 725 (1972). This comports with the literal language and the spirit of\n\xc2\xa7 3010).\nFor these reasons the Department may properly release the above-described\ndocuments in the pending litigation.\nM\n\nary\n\nC . Law ton\n\nDeputy Assistant Attorney General\nOffice o f Legal Counsel\n\n194\n\n\x0c'


b'Award of Attorney Fees in Administrative Adjudications\nUnder \xc2\xa7 609 of the Federal Aviation Act\nThe Equal Access to Justice Act (EAJA) authorizes an award of attorney fees to prevailing parties in\nadm inistrative adjudications conducted by the National Transportation Safety Board under \xc2\xa7 609\no f the Federal Aviation Act to review decisions of the Federal Aviation Administration\nThere is no support in the term s of the EAJA or its legislative history for an argum ent that an\nindividual\xe2\x80\x99s eligibility for an award of fees\xe2\x80\x94 and an agency\xe2\x80\x99s liability\xe2\x80\x94 are confined to situations\nin w hich the agency whose position is at issue in the adjudication also controls its conduct; in any\ncase, agencies generally have only a lim ited power to review their adm inistrative law judges\xe2\x80\x99\ndecisions under the EAJA.\n\nMarch 23, 1982\nMEMORANDUM OPINION FOR THE GENERAL COUNSEL,\nDEPARTMENT OF TRANSPORTATION\nThis responds to your request for the Department\xe2\x80\x99s opinion whether the Equal\nAccess to Justice Act authorizes an award of attorney fees to a party which\nprevails in administrative adjudications conducted by the National Transportation\nSafety Board (NTSB) under \xc2\xa7 609(a) of the Federal Aviation Act of 1958, 49\nU.S.C. \xc2\xa7 1429 (1976).\' For reasons stated hereafter we believe it does.\nA second question raised in your November 17 request, relating to the source\nof funds to pay a fee award under the Act, is addressed in a separate opinion of\nthis date.\nI. Proceedings Under \xc2\xa7 609(a)\nThe NTSB has jurisdiction to review on appeal orders of the Federal Aviation\nAdministration (FAA) amending, suspending, or revoking certain certificates\nissued by the Secretary of Transportation under the Federal Aviation Act. See 49\nU.S.C. \xc2\xa7 1903(a)(9). These certificates include airman certificates issued to\npilots and other flight operators, and aircraft operating certificates issued to\nowners and operators of air carriers. See 49 U.S.C. \xc2\xa7\xc2\xa7 1422 and 1423. Under\n1 Your letter phrases the question som ew hat differently: it asks \xe2\x80\x9c w hether the A ct authorizes o n e agency to m ake\nfee awards against another agency in covered adm inistrative proceedings." As will becom e ap p aren t, we th in k the\nq u estion so phrased is, as we understand your particular co n cern s, unnecessarily broad T h e issue o f the A c t\xe2\x80\x99s\napplicability in \xc2\xa7 609 proceedings is separate from that of the F A A s authority an d responsibility to expend its funds\nto pay awards m ade under the A ct. T he latter issue is discussed in our separate opinion to you of th is date on\n\xe2\x80\x9c Funding of A ttorney Fee Awards under the Equal A ccess to Justice A ct.\xe2\x80\x9d\n\n197\n\n\x0c\xc2\xa7 609 of that Act, an FAA action must be based upon a determination that \xe2\x80\x9c safety\nin air commerce or air transportation and the public interest\xe2\x80\x9d requires the action;\nin practice, its order is generally occasioned by the certificate holder\xe2\x80\x99s apparent\nviolation of one or more sections of the Federal Aviation Regulations, 14 C.F.R.\nRarts 1 through 199 (1981). See, e.g., Barnum v. NTSB, 595 F.2d 869 (D.C. Cir.\n1979) (FAA order suspending pilot\xe2\x80\x99s license for two low-flying incidents upheld).\nWhile \xc2\xa7 609 requires the FAA to advise the certificate holder of charges against\nhim, and to give him an opportunity to respond to them prior to taking any action\nto amend, suspend, or revoke his certificate, the law does not require that the\nFAA\xe2\x80\x99s action be preceded by any sort of formal hearing, nor does the FAA\nprovide such a hearing as matter of discretion. A certificate holder is, however,\nafforded an opportunity to appeal the FAA\xe2\x80\x99s action to the NTSB, a procedure\nwhich, as described below, provides for such a hearing.\nSection 609 describes the procedures governing appeals to the NTSB from an\nFAA order amending, suspending, or revoking a certificate, and reads in perti\xc2\xad\nnent part as follows:\nAny person whose certificate is affected by such an order of the\nAdministrator under this section may appeal the Administrator\xe2\x80\x99s\norder to the Board and the Board may, after notice and hearing,\namend, modify, or reverse the Administrator\xe2\x80\x99s order if it finds that\nsafety in air commerce or air transportation and the public interest\ndo not require affirmation of the Administrator\xe2\x80\x99s order. In the\nconduct of its hearings the Board shall not be bound by findings of\nfact of the Administrator. The filing of an appeal with the Board\nshall stay the effectiveness of the Administrator\xe2\x80\x99s order unless the\nAdministrator advises the Board that an emergency exists and\nsafety in air commerce o r air transportation requires the immedi\xc2\xad\nate effectiveness of his order, in which event the order shall\nremain effective and the Board shall finally dispose of the appeal\nwithin sixty days after being so advised by the Administrator. The\nperson substantially affected by the Board\xe2\x80\x99s order may obtain\njudicial review of said order under the provisions of section 1006\n[49 U.S.C. \xc2\xa7 1486], and the Administrator shall be made a party\nto such proceedings.\nFederal Aviation Act of 1958, Pub. L. No. 85-726, \xc2\xa7 609, 72 Stat. 731, 779-80\n(1958). See 49 U .S.C . \xc2\xa7 1429(a).\nFormal hearings in connection with appeals from FAA orders are conducted by\nadministrative law judges employed by the NTSB. See 49 C.F.R. \xc2\xa7 800.23.\nProcedures governing these hearings are set out in 49 C.F.R. Part 821,\nw ith special rules applicable to proceedings under \xc2\xa7 609 contained at\n\xc2\xa7\xc2\xa7 821.30-821.33. Under these rules, the order of the FAA from which appeal\nhas been taken is filed with the NTSB as a complaint; the allegations must be\nproven by the Administrator of the FAA in the subsequent hearing before the law\njudge. The Administrator has the burden of proving that the action taken against\n198\n\n\x0cthe certificate holder was reasonable and in accordance with NTSB precedent.\nBoth the certificate holder and the FAA are entitled to appeal a law judge\xe2\x80\x99s initial\ndecision to the NTSB itself; in the absence of such an appeal, however, the law\njudge\xe2\x80\x99s initial decision becomes final. See 49 C.F.R. \xc2\xa7 821.43. If such an appeal\nis taken, the NTSB reviews the law judge\xe2\x80\x99s findings of fact and conclusions of law\nand, if it determines that either are in error, may itself make findings and issue an\nappropriate order, or may remand the matter with instructions. An order of the\nNTSB may be appealed to the Court of Appeals for the District of Columbia by\n\xe2\x80\x9c any person disclosing a substantial interest in such order.\xe2\x80\x9d 49 U .S.C .\n\xc2\xa7 1486(a).2\nII. The Equal Access to Justice Act\nSection 203(a)(1) of the Equal Access to Justice Act (the Act), Pub. L. No.\n96-481,94 Stat. 2321, 2325 (1980), amends Title 5 of the United States Code to\nprovide for an award of attorney fees and other expenses to parties prevailing\nagainst an agency of the United States in certain types of administrative adjudica\xc2\xad\ntions. The pertinent provision, to be codified as 5 U.S.C. \xc2\xa7 504(a)(1), reads as\nfollows:\n(a)(1) An agency that conducts an adversary adjudication shall\naward, to a prevailing party other than the United States, fees and\nother expenses incurred by that party in connection with that\nproceeding, unless the adjudicative officer of the agency finds that\nthe position of the agency as a party to the proceeding was\nsubstantially justified or that special circumstances make an\naward unjust.\nAn \xe2\x80\x9c adversary adjudication\xe2\x80\x9d is defined in \xc2\xa7 504(b)(1)(C) as:\nan adjudication under section 554 of this title in which the\nposition of the United States is represented by counsel or other\xc2\xad\nwise, but excludes an adjudication for the purpose of establishing\nor fixing a rate or for the purpose of granting or renewing a\nlicense. . . .\nYour letter concedes, as it must, that \xc2\xa7 609 proceedings before the NTSB and\nits administrative law judges meet the definition of an \xe2\x80\x9c adversary adjudication\xe2\x80\x9d\nunder \xc2\xa7 504(a)(1): they are conducted under 5 U.S.C. \xc2\xa7 554, and are neither for\nthe purpose of \xe2\x80\x9c fixing a rate\xe2\x80\x9d nor for \xe2\x80\x9c granting or renewing a license.\xe2\x80\x9d Notwith\xc2\xad\nstanding this, you take the position that a fee award under the Act is unavailable in\n\xc2\xa7 609 proceedings, arguing that \xc2\xa7 504(a)(1) is confined in its applicability to\n2 W hile the statutory language is u n clear w ith respect to w hether th e FAA is entitled to appeal from a n N TSB\norder, and w hile there a p p e ar to be no ju d icia l holdings on point, we understand that th e statutory phrases \xe2\x80\x9c person\nsubstantially a ffe c te d " an d \xe2\x80\x9c person disclosing a substantial interest" have been interpreted b y berth th e FAA and the\nN TSB to lim it th e right to seek judicial review o f an N TSB order to holders o f certificates. See also H .R . R ep. N o.\n2 5 5 6 ,85th C o n g ., 2d S ess. 89 (1958) (provision perm itting FAA A dm inistrator to seek ju d icia l review o m itte d from\nfinal version o f 1958 A ct).\n\n199\n\n\x0cthose proceedings under 5 U.S.C. \xc2\xa7 554 in which an agency both prosecutes and\nadjudicates an action. That is, you believe that \xc2\xa7 504(a)(1) by its terms applies\nonly to a proceeding in which the \xe2\x80\x9c agency that conducts\xe2\x80\x9d it is also the \xe2\x80\x9c party to\nthe proceeding\xe2\x80\x9d against whom the private party must prevail. We do not agree\nthat the authority conferred by \xc2\xa7 504(a)(1) may be construed so narrowly,\nparticularly where such a construction would result in exempting from the Act\xe2\x80\x99s\ncoverage a class of adversary adjudications no different in their effect on private\nindividuals than other adjudications plainly covered by the terms of the Act.\nThe terms of \xc2\xa7 504(a)(1) admittedly do not speak directly to the situation in\nwhich the agency conducting the adversary adjudication is not also the agency\nwhose position is at issue.3 We do not agree, however, that the language of the\nsection must be read to confine its application to situations involving a single\nagency. The use of the article \xe2\x80\x9c the\xe2\x80\x9d to identify the agency whose position as a\nparty to the proceeding may or may not be found to be substantially justified does\nnot, in our view, necessarily identify it as the same agency which conducts the\nadversary adjudication and employs the adjudicative officer. Finding the plain\nlanguage of \xc2\xa7 504(a)(1) not to be conclusive, we must interpret the fee-shifting\nprovisions of \xc2\xa7 504(a)(1) in light of other provisions of the statute, the legislative\nhistory of the Act, and Congress\xe2\x80\x99 purpose in enacting it.4\nThe purpose of the Act, as reflected in its preamble, is \xe2\x80\x9c to diminish the\ndeterrent effect of seeking review of or defending against, [unreasonable] gov\xc2\xad\nernmental action\xe2\x80\x9d because of the expense involved. See 5 U.S.C. \xc2\xa7 504 note.\nThe legislative history of the A ct is replete with references to situations in which\nindividuals are forced to expend large sums to defend themselves against un\xc2\xad\njustified governmental action. The House Judiciary Committee noted in its report\nthat:\n[f]or many citizens, the costs of securing vindication of their\nrights and the inability to recover attorney fees preclude resort to\nthe adjudicatory process. When the cost of contesting a Govern\xc2\xad\nment order, for example, exceeds the amount at stake, a party has\nno realistic choice and no effective remedy. In these cases, it is\nmore practical to endure an injustice than to contest it.\n3 S uch situations are, to be su re, com paratively rare in th e adm inistrative context In d eed , we are aw are o f only\ntw o sim ilar situations to w hich the Act on its face w ould ap p ear otherw ise to be applicable, these are appeals from\ncitations o f the S ecretary o f L abor before the O ccupational S afety and H ealth Review C om m ission under 2 9 U S .C .\n\xc2\xa7 6 5 9 , and appeals from citations of the S ecretary o f L abor before the Federal M ine S afety and H ealth Review\nC o m m issio n , 30 U S .C \xc2\xa7 815 However, as d iscu ssed in the text infra. C ongress was clearly cognizant in enacting\nthis A ct o f the review procedure contained in 29 U .S .C . \xc2\xa7 659.\n4 Even if the term s o f \xc2\xa7 504(a)(1) were le ss am biguous w ith respect to th eir applicability to adjudications\ninvolving m ore than one agency, it is a fam iliar m axim o f statutory co nstruction that a rem edial statute should be\nliberally co n stru e d to effect the rem edial p u rp o se for w hich it was enacted . See 3 D S an d s, Sutherland S tatutory\nC o nstruction \xc2\xa7 6 0 01 (4th e d . 1974). T hus, even if th e m eaning o f a statute seem s plain on its face, \xe2\x80\x9c [t]he\ncircu m stan c es o f the enactm ent o f particular legislation m ay persuade a co u rt that C o n g ress did not intend words o f\nco m m on m ean in g to have th e ir literal effect.\xe2\x80\x9d Watt v Alaska, 451 U .S . 2 5 9 , 266 (1981), citing Church c f the Holy\nTrinity v. United States, 143 U S . 457 , 4 5 9 (1892). A n d , if the plain m eaning o f the statute produces \xe2\x80\x9c an\nu n reasonable [result] \xe2\x80\x98plainly at variance w ith th e policy o f the legislation as a w h o le\xe2\x80\x99 [the S uprem e C ourt] has\nfollow ed that purpose rath er than the literal w ords.*\xe2\x80\x99 United States v American Trucking Ass\'ns, 3 1 0 U .S . 5 3 4 ,5 4 3\n(1940). See also Steelworkers v. Weber, 443 U .S . 193, 201 (1979); Train v Colorado Public Interest Research\nGroup, 4 2 6 U .S . 1. 10 (1976).\n\n200\n\n\x0cH.R. Rep. No. 1418, 96th Cong., 2d Sess. 9 (1980) (hereafter House Report).\nThe result in many cases is that \xe2\x80\x9c the Government with its greater resources and\nexpertise can in effect coerce compliance with its position.\xe2\x80\x9d Id. at 10.\nThe fee-shifting provisions of the Act were intended not only to reduce\nsubstantially the deterrent effect on individuals of this disparity in resources, but\nalso to \xe2\x80\x9c insuref] the legitimacy and fairness of the law.\xe2\x80\x9d Id. The Act thus\nrecognizes that \xe2\x80\x9c the expense of correcting error on the part of the Government\nshould not rest wholly on the party whose willingness to litigate or adjudicate has\nhelped to define the limits of federal authority.\xe2\x80\x9d Id. See also S. Rep. No. 253,\n96th Cong., 1st Sess. 5-6 (1979).\nWe believe it would be inconsistent with the Act\xe2\x80\x99s broad remedial purpose to\ncarve out of the Act\xe2\x80\x99s coverage any particular category of \xe2\x80\x9c administrative\nadjudications\xe2\x80\x9d as that term is defined in the Act, at least absent any suggestion in\nthe legislative history that Congress intended to do so. More importantly, we find\nno support in the Act or its history for your position that an individual\xe2\x80\x99s eligibility\nfor a fee award\xe2\x80\x94 and an agency\xe2\x80\x99s liability\xe2\x80\x94 should be confined to situations in\nwhich the agency whose position is at issue in the adjudication also controls its\nconduct.5\nReference to other specific provisions of the Act reinforces our conclusion that\n\xc2\xa7 504(a)(1) was not intended to apply only to proceedings conducted by one\nagency as a review of action taken by another agency. For example, \xc2\xa7 504(d)(1)\nprovides that awards under \xc2\xa7 504(a)(1) \xe2\x80\x9c may be paid by any agency over which\nthe party prevails. . . .\xe2\x80\x9d (emphasis added). This language suggests that Congress\nat the very least contemplated that a prevailing party would be entitled to an\naward from an agency other than the one actually conducting the proceeding.\nOur conclusion that Congress did not intend to render the Act inapplicable in\nproceedings conducted by one agency to review actions taken by another is\nreinforced, if not required, by numerous references in the legislative history to\nthe situation presented by appeals to the independent Occupational Safety and\nHealth Review Commission from citations of the Secretary of Labor under\n3\nYour position appears to be prem ised on the assum ption that an agency w hich both conducts and pro secu tes an\nadm inistrative adjudication has the pow er to review (and potentially to reverse) the findings o f the \xe2\x80\x9c adjudicative\no ffic er" which trig g er the statute\xe2\x80\x99s directive to pay a fee award However, as we read the term s o f \xc2\xa7 504(a)(1) in light\no f C ongress\' purpose, they preclude review of these findings at the adm inistrative level. T he fee award called fo r by\n\xc2\xa7 504(a)(1) is m andatory unless certain findings are m ade by the adjudicative officer o f the agency. A n d , the\nw ording of \xc2\xa7 504(a)(3) contains an explicit suggestion that the decision of the adjudicative officer on these issues\nwas intended by C ongress to be unreview able at the adm inistrative level* \xe2\x80\x9c The decision of the adjudicative o fficer o f\nth e agency under this section shall be m ade a part o f the record containing the final decision o f the agency.\n" We\nrecognize that C ongress\xe2\x80\x99 failure to provide for agency review o f a fee award may result in an ag en cy \xe2\x80\x99s being un ab le to\nob tain judicial review of a fee aw ard except in the context of an appeal on the m e n ts o f the underlying decision o f the\nadversary adjudication This is because only the private p arty m ay appeal from a fee d eterm ination u n d er\n\xc2\xa7 504(a)(1) See \xc2\xa7 504(c)(2) O n the other h and, an interpretation of the A ct to perm it an agency the last w ord on\nw h eth er its position in the underlying adjudication was or was not substantially justified w ould underm ine th e very\np urpose which C ongress had in enacting the law T h is is underscored by the standard of judicial review of a failu re to\nm ake an award provided in \xc2\xa7 5 0 4 (c)(2)\xe2\x80\x99 a court m ay m odify th e fee determ ination under \xc2\xa7 504(a)(1) only if it finds\nthat the failure to make an award was \xe2\x80\x9c an abuse of discretion \xe2\x80\x9d We have no doubt that applying this stan d ard of\nju d icia l review to an agency\xe2\x80\x99s assessm ent of the reasonableness of its ow n conduct w ould result in few fee aw ards\nbeing made under \xc2\xa7 504(a)( 1). T h is is not to say that no aspect o f the adjudicative officer\xe2\x80\x99s fee determ ination o u g h t to\nbe reviewable w ithin the agency, it is sim ply to say that the agency has no authority to revise the adjudicative offic er\xe2\x80\x99s\nfindings on the tw o questions w hich under the A ct are determ inative of an aw ard\xe2\x80\x99s being m ade: that an ag e n cy \xe2\x80\x99s\npo sition was not \xe2\x80\x9c substantially ju s tifie d ," and that no \xe2\x80\x9c special circum stances m ake an aw ard unjust."\n\n201\n\n\x0c29 U .S.C. \xc2\xa7 659 .See, e.g., 126 Cong. Rec. 27681-82 (1980) (statement of Sen.\nDeConcini); 126 Cong. Rec. 28653-54 (1980) (statement of Rep. Symms). In\nlight of these references, we believe it would be unreasonable to conclude that\nCongress did not intend to authorize an award of fees in OSHA adjudications\nagainst the Secretary of Labor. We see no relevant basis on which to distinguish\nan award against the FAA in \xc2\xa7 609 proceedings.\nMoreover, the potential for administrative abuse inherent in the OSHA con\xc2\xad\ntext, which Congress plainly intended to correct through the fee-shifting mecha\xc2\xad\nnism of \xc2\xa7 504(a)(1), is present in the \xc2\xa7 609 situation as well. The FAA may, by\nunilateral action unaccompanied by full-scale procedural protections, impose a\nsignificant burden on a private person\xe2\x80\x99s ability to carry on a business or earn a\nlivelihood. The burden, once imposed, can only be lifted through that person\xe2\x80\x99s\nwillingness to resort to what may be lengthy and expensive administrative appeal\nand, possibly, litigation. Thus, it may be \xe2\x80\x9c more practical to endure an injustice\nthan to contest it.\xe2\x80\x9d House Report at 9. We can think of no reason, consistent with\nthe purpose of the Act, why the agency which imposed the burden should escape\nliability for attorney fees where its position is not substantially justified.\nWe conclude, therefore, that proceedings under \xc2\xa7 609 were intended by\nCongress to be covered by the Act. Thus, in the event the FAA\xe2\x80\x99s position is not\nfound to be substantially justified by the administrative law judge presiding over\nthe adjudication, the prevailing party is entitled to an award of fees against the\nFAA.6\nWe recognize that our conclusion with respect to the Act\xe2\x80\x99s applicability to\n\xc2\xa7 609 proceedings may not appear to be directly responsive to your concern that\nthe Act not be interpreted \xe2\x80\x9c to permit one agency to make a fee award against\nanother.\xe2\x80\x9d In this regard, we would simply point out that the Act in this case does\nno more than supplement remedial authority which Congress has already con\xc2\xad\nferred on the NTSB to review and, if necessary, reverse FAA orders under \xc2\xa7 609\nof the Act.\nIn addition, whether or not an award of fees will be made under \xc2\xa7 504(a)(1)\ndepends upon certain findings by the administrative law judge\xe2\x80\x94 findings which,\nunder the terms of the Act would not in any event be administratively reviewable\nby the agency conducting the proceeding. See note 5, supra. The position of the\nFAA in \xc2\xa7 609 proceedings is in this sense no different from the position of an\nagency which both conducts and prosecutes an administrative adjudication. In\neither case, an administrative law judge acting independently is charged with\nmaking the final administrative determination.\nFinally, we do not believe our conclusion with respect to the applicability of\nthe Act in \xc2\xa7 609 proceedings is inconsistent with the position set forth, taken in\ncontext, in the Deputy Attorney General\xe2\x80\x99s letter of May 12, 1981, to the\nAdministrative Conference of the United States. Those comments express con\xc2\xad\ncern over a construction of the Act which would impose on an agency, having no\n6\nA s s tated in no te 1, supra, the issue of the F A A \xe2\x80\x99s authority and responsibility to expend its funds to pay aw ards is\nd iscu ssed in o u r sep arate op in io n to you of this date on \xe2\x80\x9c B inding o f A ttorney F ee Awards un d er the Equal A ccess to\nJu stic e A ct.\xe2\x80\x9d\n\n202\n\n\x0cprosecutorial or decisional authority in an administrative adjudication, respon\xc2\xad\nsibility for the payment of a fee award simply because, as an intervenor, it took a\nposition adverse to the interests of a private party. While we have not directly\nstudied that issue, we do not see any basis for differing with the Deputy Attorney\nGeneral\xe2\x80\x99s position. However, we decide only that when the FAA takes an adverse\naction under \xc2\xa7 609, it may be subjected to payment of an award under the Equal\nAccess to Justice Act in a proceeding brought to review its action before the\nNTSB.\nT heodore B. O\n\nlson\n\nAssistant Attorney General\nOffice cf Legal Counsel\n\n203\n\n\x0c'


b'Authority of the Federal Financial Supervisory Agencies\nUnder the Community Reinvestment Act\n\nThe federal financial supervisory agencies lack authority under the C om m unity R einvestm ent Act o f\n1977 to provide by regulation that financial institutions that do not m eet the credit needs o f their\ncom m unities m ay be subject to adm inistrative enforcem ent actions under 12 U S.C. \xc2\xa7 1818.\n\nD ecem ber 15, 1994\n\nM e m o r a n d u m O p in io n f o r t h e C o m p t r o l l e r o f t h e C u r r e n c y\n\nThis memorandum responds to your request for our opinion concerning whether\nthe federal financial supervisory agencies (\xe2\x80\x9cthe agencies\xe2\x80\x9d)1 have authority under\nthe Community Reinvestment Act of 1977 (\xe2\x80\x9cCRA \xe2\x80\x9d), 12 U.S.C. \xc2\xa7\xc2\xa7 2901-2907, to\nprovide by regulation that financial institutions that do not meet the credit needs of\ntheir communities may be subject to administrative enforcement actions under 12\nU.S.C. \xc2\xa7 1818. W e conclude that the agencies lack such authority.2\nI.\nThe purpose of the CRA is \xe2\x80\x9cto require each appropriate Federal financial super\xc2\xad\nvisory agency to use its authority when exam ining financial institutions, to encour\xc2\xad\nage such institutions to help meet the credit needs of the local com m unities in\nwhich they are chartered consistent with the safe and sound operation of such in\xc2\xad\nstitutions.\xe2\x80\x9d 12 U.S.C. \xc2\xa7 2901(b). To further this end, the CRA requires the agen\xc2\xad\ncies to assess an \xe2\x80\x9cinstitution\xe2\x80\x99s record of meeting the credit needs of its entire\ncom m unity,\xe2\x80\x9d 12 U.S.C. \xc2\xa7 2903(a)(1), and to \xe2\x80\x9ctake such record into account in its\nevaluation of an application for a deposit facility by such institution.\xe2\x80\x9d 12 U.S.C.\n\xc2\xa7 2903(a)(2). \xe2\x80\x9c[A pplication for a deposit facility\xe2\x80\x9d is defined to include applica\xc2\xad\ntions for approval to open a branch, to relocate a main or branch office, or to\nmerge with or acquire another institution. 12 U.S.C. \xc2\xa7 2902(3). The agencies\nmust prepare a written evaluation of each institution\xe2\x80\x99s performance under the CRA,\nassign a rating to that performance, and disclose that rating to the public. 12\nU.S.C. \xc2\xa7 2906. The CRA also authorizes the agencies to promulgate regulations to\ncarry out the purposes of the Act. 12 U.S.C. \xc2\xa7 2905.\n1 T he federal financial supervisory agencies are the O ffice o f the C om ptroller o f the C urrency, the Federal\nR eserve System , the Federal Deposir Insurance C orporation, and the O ffice o f T hrift S upervision\n2 T he O ffice o f T h rift Supervision (\xe2\x80\x9cO T S\xe2\x80\x9d) has suggested in a letter to this O ffice that it has sufficient\nauthority u n d er the H om e O w n ers\' Loan Act (\xe2\x80\x9cH O L A \xe2\x80\x9d), 12 U S.C. \xc2\xa7\xc2\xa7 1461-1468, to enable it lo prom ulgate\nand enforce a requirem ent that regulated in stitutions help m eet the credit needs of their com m unities. W e\nexpress no opinion on the authority o f OTS or the other agencies under H O LA or any other statute besides\nthe C R A\n\n249\n\n\x0cOpinions o f Ihe Office o f L egal C ounsel\n\nThe agencies have proposed substantial revisions to their regulations im ple\xc2\xad\nm enting the CRA. S ee Community Reinvestment Act Regulations, 58 Fed. Reg.\n67,466-67,508 (1993). The proposed regulations provide that financial institutions\n\xe2\x80\x9chave a continuing and affirmative obligation to help m eet the credit needs o f their\ncomm unities, including low- and m oderate-incom e areas, consistent with safe and\nsound operations.\xe2\x80\x9d S ee id. at 67,479 (\xc2\xa7 25.2). The proposed regulations state that\nan institution rated by an agency to be in \xe2\x80\x9cSubstantial N oncom pliance\xe2\x80\x9d with that\nobligation shall be subject to enforcement actions under 12 U.S.C. \xc2\xa7 1818, which\nauthorizes the agencies to issue cease-and-desist orders and levy civil monetary\npenalties. See id. at 67,480 (\xc2\xa7 25.6(b)). The potential monetary penalties the in\xc2\xad\nstitutions would face range from not more than $5,000 a day for each day during\nwhich a \xe2\x80\x9cfirst tier\xe2\x80\x9d violation continues to a m aximum daily penalty of $1,000,000\nor one percent o f the institution\xe2\x80\x99s total assets, whichever is lower, for a \xe2\x80\x9cthird tier\xe2\x80\x9d\nviolation. S ee 12 U .S.C. \xc2\xa7 1818(i)(2).\nAs discussed below, we do not believe that the agencies are authorized to bring\nactions under 12 U.S.C. \xc2\xa7 1818 to enforce the CRA. O ur conclusion is based on\nthe clearly expressed intent of C ongress in enacting the CRA,3 and rests on two\nindependent rationales: (1) the CRA application evaluation procedure is the exclu\xc2\xad\nsive enforcem ent m echanism authorized by Congress; and (2) enforcem ent under\n12 U .S.C. \xc2\xa7 1818 is unavailable because the CRA does not impose an obligation\nthat could provide the basis for a \xc2\xa7 1818 action or authorize the agencies to impose\nsuch an obligation.\nII.\n\nW e believe that Congress has plainly spoken on the question o f what enforce\xc2\xad\nm ent tools are available to the agencies under the CRA. The CRA provides for\nenforcem ent only in the application context, requiring that the agencies shall take\nan institution\xe2\x80\x99s record of meeting the credit needs of its community into account\nwhen evaluating that institution\xe2\x80\x99s application for a deposit facility. Congress speci\xc2\xad\nfied only this one enforcem ent mechanism in the CRA, and we do not believe it is\nperm issible for the agencies to em ploy other enforcem ent mechanisms, on the\nauthority o f the CRA, in the absence o f some basis in the text of the statute. Agen\xc2\xad\ncies m ay act only pursuant to delegations of power that are explicit or can fairly be\n3\nT h is is th e re fo re not a situ a tio n where C h ev ro n d eferen ce may be relied upon to support an agency\nin terpretatio n . In C h evro n U S A . In c v N a tio n a l R eso u rces D efense C ouncil, I n c , 467 U S 837 (1984),\nthe S u p rem e C o u rt an n o u n ced a tw o-step rule f o r courts to follow w hen review ing an ag en c y \xe2\x80\x99s construction\no f a s tatu te th at it ad m in isters. T h e court m ust alw ay s first exam ine \xe2\x80\x9cw hether C ongress has directly spoken\nto the p recise q u e stio n at issue. If th e intent o f C ongress is clear, that is the end o f the m atter; for the court,\nas well as the ag en cy , m ust g iv e effect to the u n am b ig u o u sly expressed intent o f C ongress \xe2\x80\x9d Id a t 842-43.\nIf, how ev er, \xe2\x80\x9c the statu te is sile n t o r ambiguous w ith respect to the specific issue, the question for the court is\nw hether th e a g e n c y \xe2\x80\x99s an sw er is based on a p erm issib le co n stru ctio n o f the statute * Id. at 843 As discussed\nin the tex t, w e d o not believe th a t th e CRA is s ile n t or am b ig u o u s w ith resp ect to the authority being vested\nin the agencies. A cco rd in g ly , there is no basis fo r deferring to an agency interpretation\n\n250\n\n\x0cA u thority o f the Federal F inancial Supervisory A gencies U nder the C om m unity R einvestm ent A ct\n\nimplied from the statutory scheme. See R ailw ay L abor E xecu tives\xe2\x80\x99 A s s \xe2\x80\x99n v. N a\xc2\xad\ntional M ediation Bd., 29 F.3d 655, 670-71 (D.C. Cir. 1994) (en banc), cert, d e \xc2\xad\nnied, 514 U.S. 1032(1995).\nThe CRA contains no express directive for the agencies to use any other modes\nof enforcement, much less such coercive enforcem ent as cease-and-desist orders\nand monetary penalties, and there is no basis for inferring such authority from any\nprovision in the statute. The statute\xe2\x80\x99s only general grant of authority to the agen\xc2\xad\ncies is the authority to promulgate im plem enting regulations. We reject the argu\xc2\xad\nment that a delegation of broad enforcement authority can be inferred from the\nstatute\xe2\x80\x99s delegation of authority to issue implementing regulations and the fact that\nthe CRA does not explicitly state that the agencies may only sanction financial in\xc2\xad\nstitutions through the application process. First of all, the authority to issue regu\xc2\xad\nlations is limited to \xe2\x80\x9ccarry[ing] out the purposes\xe2\x80\x9d of the CRA, 12 U.S.C. \xc2\xa7 2905,\nand those purposes are limited to requiring the agencies to \xe2\x80\x9cuse [their] authority\nwhen exam ining fin an cial institutions, to encourage such institutions to help meet\nthe credit needs\xe2\x80\x9d of their communities, 12 U.S.C. \xc2\xa7 2901(b) (emphasis added).\nMore fundamentally, as the D.C. Circuit wrote recently, \xe2\x80\x9c [w]ere courts to presum e\na delegation of power absent an express w ithholding o f such power, agencies\nwould enjoy virtually limitless hegemony, a result plainly out of keeping with\nChevron and quite likely with the Constitution as well.\xe2\x80\x9d Railw ay L abor Execu\xc2\xad\ntives\' A s s \xe2\x80\x99n, 29 F.3d at 671.\nThe legislative history o f the CRA firmly supports our conclusion that the CRA\ndoes not authorize the agencies to employ other methods of enforcement. Neither\nthe House Conference Report nor the Senate Report makes any mention of a\nmethod of sanction other than through the application process,4 and when intro\xc2\xad\nducing the bill on the Senate floor, Senator Proxmire stated that \xe2\x80\x9c[t]he require\xc2\xad\nments in the bill apply only to applications otherwise required under existing law\nor regulations and do not provide any new authority to the bank regulatory agen\xc2\xad\ncies.\xe2\x80\x9d 123 Cong. Rec. 1958 (1977). Similarly, during the floor debate on whether\nto delete the CRA provisions from the Housing and Community Development Act,\nSenator Lugar stated that \xe2\x80\x9c[t]he sanctions that are finally offered, even if some in\xc2\xad\nstitution is found guilty in the process, are apparently that the institution would\nhave some difficulty extending its facilities, no more and no less than that.\xe2\x80\x9d Id. at\n17,633.\nMore specifically, it would be inconsistent with the views expressed by Senator\nProxmire for the agencies to rely on the CRA for authority to issue cease-anddesist orders or impose monetary penalties. Speaking as the bill\xe2\x80\x99s chief sponsor,\nSenator Proxmire stressed the limited nature o f the authority being vested in the\n\n4\nIn fact, ihe conference report describes the purposes o f the C RA in very m odest term s. \xe2\x80\x9cThis title and\nother am endm ents contained in this bill are designed to en co u rag e m ore coordinated efforts betw een pnvate\ninvestm ent and federal grants and insurance in o rd er to in crease the viability o f our urban com m unities."\nH R C o n f R ep No. 95-634, at 76 (1977), rep rin ted in 1977 U S C C .A N 2965, 2995\n\n251\n\n\x0cOpinions o f th e Office o f L egal C ounsel\n\nagencies. W hen introducing the bill, Senator Proxmire stated that the CRA \xe2\x80\x9cis\nintended to establish a system of regu latory incentives to encourage banks and\nsavings institutions to more effectively meet the credit needs of the localities they\nare chartered to serve.\xe2\x80\x9d Id. at 1958 (emphasis added). During floor debate on the\nlegislation, he stated that \xe2\x80\x9cwe have to do something to nudge [the banks], influence\nthem, p ersu a d e them to invest in their com munity.\xe2\x80\x9d Id. at 17,630 (emphasis\nadded). He stated during hearings on the CRA that \xe2\x80\x9c[w]hat are we [sic] trying to\ndo here is not to provide for any terrible sanction. . . . All we are saying is that the\njob that you do in servicing community needs should be taken into consideration\nas one elem ent in w hether or not branching should be approved. It is a mild pro\xc2\xad\nposal, it seems to m e.\xe2\x80\x9d Community C redit N eeds: H earings on S. 4 0 6 Before the\nSenate Comm, on Banking, Housing and U rban Affairs, 95th Cong. 323 (1977)\n(emphasis added).5\nFinally, it is \xe2\x80\x9can \xe2\x80\x98elemental canon\xe2\x80\x99 of statutory construction that where a statute\nexpressly provides a remedy, courts must be especially reluctant to provide\nadditional rem edies.\xe2\x80\x9d Karahalios v. N ational F e d \xe2\x80\x99n o f Fed. Em ployees, 489\nU.S. 527, 533 (1989) (quoting Transam erica M ortgage Advisors, Inc. v. Lewis,\n444 U.S. 11, 19 (1979)).6 \xe2\x80\x9cIn such cases, \xe2\x80\x98[i]n the absence o f strong indicia\nof contrary congressional intent, we are com pelled to conclude that Congress\nprovided precisely the remedies it considered appropriate.\xe2\x80\x99\xe2\x80\x9d K arahalios, 489 U.S.\nat 533 (quoting M iddlesex County Sew erage Auth. v. Sea Clam m ers A s s \xe2\x80\x99n,\n453 U.S. 1, 15 (1981)). To move from an enforcement scheme that relies upon a\nsystem o f regulatory incentives to a scheme that entails cease-and-desist orders and\npotentially substantial monetary penalties is a leap that we do not believe can be\njustified on the basis o f the text, purpose, and legislative history of the CRA. We\ntherefore conclude that enforcement under 12 U.S.C. \xc2\xa7 1818 is not authorized by\nthe CRA.\n\n5 S e n a to r P roxm ire did state w hen introducing the co n feren ce report on the Senate floor that \xe2\x80\x9cthe intention [o f C o n g ress] is as stated in [ 12 U S C \xc2\xa7 2 9 0 1 (b )] thal the agencies use the full extent o f their authority,\nincluding th eir gen eral re g u lato ry authority, u n d e r [12 U .S C. \xc2\xa7 2905], to encourage all regulated depository\nin stitu tio n s\xe2\x80\x99 re sp o n siv en ess to com m unity n e e d s .\xe2\x80\x9d 123 C ong Rec. 31,887 (1977) H ow ever, at best this\nstatem en t is am b ig u o u s, the d ire c tio n to use full regulatory authority probably was sim ply in reference to the\nsection o f the C R A d ire c tin g the agencies to prom ulgate im plem enting regulations and not to som e other\ngrant o f en fo rcem en t au th o rity such as 12 U S C \xc2\xa7 1818. It is im possible to know w hat regulations S enator\nProxm ire e x p ected the ag en cies to issue, alth o u g h we note th at (consistent with the phrasing in C R A \xe2\x80\x99s\nstatem en t o f p urpose sectio n ) he used the w ord \xe2\x80\x9cen co u rag e\xe2\x80\x9d to describe w hat im pact the regulations should\nhave on in stitu tio n s ra th e r than a w ord like \xe2\x80\x9c req u ire \xe2\x80\x9d M oreover, we do not believe this one statem ent, even\nif read bro ad ly , can su p p o rt a g e n eral grant o f enforcem ent authority to the agencies in light o f the statutory\ntext and o th er leg islativ e history.\n6 T h a t K a ra h a lio s and the cases cited th e re in involved claim ed private rights o f action does not make\nthem inapposite. First, the u n d erly in g inquiry o f those cases and this case is the sam e\' can congressional\nintent to en fo rce a statu to ry sch e m e in a p articu lar way be inferred from the statutory language, structure or\nlegislative h istory? S econd, co u rts if anything have broader pow er than adm inistrative agencies to fashion\nappropriate relief, courts, for e x am p le, may lo o k to their broad equitable jurisdiction\n\n252\n\n\x0cA u th o rity o f the F ederal Financial Supervisory A gencies U nder the C om m unity R einvestm ent Act\n\nIII.\nWe reach the same conclusion when we analyze the question by focusing di\xc2\xad\nrectly on 12 U.S.C. \xc2\xa7 1818. Under that section, the agencies may issue a ceaseand-desist order against a financial institution that \xe2\x80\x9cis violating or has violated, or\n. . . is about to violate, a law, rule, or regulation,\xe2\x80\x9d 12 U.S.C. \xc2\xa7 1818 (b)(1), and\nthey may impose civil monetary penalties against an institution that violates \xe2\x80\x9cany\nlaw or regulation\xe2\x80\x9d or any cease-and-desist order, 12 U.S.C. \xc2\xa7 1818(i)(2). It might\nbe argued that such sanctions may be imposed upon an institution that receives a\n\xe2\x80\x9csubstantial noncompliance\xe2\x80\x9d CRA rating because that would be a violation of the\nCRA or the proposed regulations. As discussed below, we reject that argument.\nBy its terms, the CRA provides only that the agencies must evaluate an institu\xc2\xad\ntion\xe2\x80\x99s record of meeting the credit needs of the community, that the agencies must\ntake that record into account when considering an institution\xe2\x80\x99s application for per\xc2\xad\nmission to merge or expand, and that the agencies must prepare a written record of\ntheir evaluations for public dissemination. Nowhere does the CRA expressly im\xc2\xad\npose any obligation on financial institutions themselves. The statute\xe2\x80\x99s references\nto financial institutions are couched in precatory rather than mandatory terms.\nIn the \xe2\x80\x9cstatement of purpose\xe2\x80\x9d provision of the CRA, Congress stated that \xe2\x80\x9c [i]t is\nthe purpose of this chapter to require each appropriate Federal financial supervi\xc2\xad\nsory agency to use its authority . . . to encourage such institutions to help meet the\ncredit needs o f [their] communities.\xe2\x80\x9d 12 U.S.C. \xc2\xa7 2901(b) (emphasis added). The\nCRA does not instruct the agencies to require institutions to meet community\ncredit needs. Moreover, although the CRA directs the agencies to take an institu\xc2\xad\ntion\xe2\x80\x99s record of meeting credit needs into account when evaluating the institution\xe2\x80\x99s\napplication for a deposit facility, 12 U.S.C. \xc2\xa7 2903, it does not require the agencies\nto deny applications from institutions with questionable records.7\nNor are any obligations, violation o f which is sanctionable under \xc2\xa7 1818, im\xc2\xad\nposed by the following statements in the \xe2\x80\x9cCongressional findings\xe2\x80\x9d section of the\n\n7\nThe case law recognizes thal w hile the agencies are authorized to refuse to approve applications from\nfinancial institutions that do not m eet the credit needs o f their com m unities, they are not required to do so.\nIn one case that involved a challenge to an ag en cy \'s approval o f an institu tio n \xe2\x80\x99s application to open a branch\noffice, the court refused to invalidate the approval on the grounds that the agency and the requesting institu \xc2\xad\ntion had allegedly failed to com ply w ith the requirem ents o f the C R A C orning Sav. & Loan A s s \'n v. F ed \xc2\xad\neral H om e Loan B ank Bd., 571 F Supp 396 (E .D ^ rk 1983), a ffd , 736 F 2d 479 (8th C ir 1984). T he\ncourt stated that \xe2\x80\x9c [t]he C R A itself does not provide for any sanctions for an unsatisfactory record, nor does it\neven define w hat an unsatisfactory record w ould be The C R A m erely requires that the Board assess an\nin stitutio n \xe2\x80\x99s co m m u n ity credit record and consider lhat record w hen evaluating branch a p plications.\xe2\x80\x9d 571 F\nSupp. at 403 S e e also N a tio n a l State B a n k v Long, 630 F 2d 981, 984 (3d C ir. 1980) (in deciding there was\nno federal law ex p licitly prohibiting redlining, so that a state anti-redlining statute was not preem pted, the\ncourt staled that under the CRA , \xe2\x80\x9cthe C o m p tro ller m ay, but need not, deny an application for a deposit facil\xc2\xad\nity lo a national bank that fails to m eet the needs o f us local co m m unity\xe2\x80\x9d ); H icks v Resolution Trust C orp.,\n970 F.2d 378, 382 (7th Cir. 1992) (in concluding lhat a fired em ployee could not state a claim for retaliatory\ndischarge because the C R A did not constitute a clearly m andated public policy, the court stated that the Act\ndoes not provide for crim inal sanctions o r private causes o f action; agencies m ay \xe2\x80\x9cat m ost\xe2\x80\x9d consider an in \xc2\xad\nstitu tio n \'s record w hen evaluating an application)\n\n253\n\n\x0cO pinions o f Ihe O ffic e o f L egal C ounsel\n\nCRA: that \xe2\x80\x9d[t]he Congress finds th a t. . . regulated financial institutions have con\xc2\xad\ntinuing and affirm ative obligation to help meet the credit needs of the local com\xc2\xad\nm unities in which they are chartered,\xe2\x80\x9d 12 U.S.C. \xc2\xa7 2901(a)(3), and that \xe2\x80\x9c[t]he\nC ongress finds that . . . regulated financial institutions are required by law to dem \xc2\xad\nonstrate that their deposit facilities serve the convenience and needs of the commu\xc2\xad\nnities in which they are chartered to do business,\xe2\x80\x9d 12 U.S.C. \xc2\xa7 2901(a)(1). These\nfindings are an indicator o f congressional intent and may be looked to by the agen\xc2\xad\ncies in form ulating their regulations to im plem ent the CRA. However, they are not\n\xe2\x80\x9coperative provisions\xe2\x80\x9d o f the statute and thus cannot by themselves impose obliga\xc2\xad\ntions on financial institutions or override operative provisions that indicate that\nCongress did not intend to impose an obligation violation o f which is sanctionable\nunder \xc2\xa7 1818. S ee A ssociation o f Am. R.R. v. C ostle, 562 F.2d 1310, 1316 (D.C.\nCir. 1977) (\xe2\x80\x9cA pream ble no doubt contributes to a general understanding of a stat\xc2\xad\nute, but it is not an operative part of the statute and it does not enlarge or confer\npowers on adm inistrative agencies or officers. W here the enacting or operative\nparts o f a statute are unambiguous, the meaning o f the statute cannot be controlled\nby language in the pream ble. The operative provisions o f statutes are those which\nprescribe rights and duties and otherwise declare the legislative w ill.\xe2\x80\x9d). See also\nC ouncil o f H aw aii H otels v. A gsalud, 594 F. Supp. 449, 453 (D. Haw. 1984)\n(in determ ining whether Hawaii legislature intended to regulate collectively bar\xc2\xad\ngained health care plans, court rejected defendants\xe2\x80\x99 argument that \xe2\x80\x9cfindings and\npurpose\xe2\x80\x9d section o f statute authorized state regulation of the plans when an opera\xc2\xad\ntive provision o f the statute made it clear that the plans were not subject to regula\xc2\xad\ntion).\nFinally, we do not believe that the agencies\xe2\x80\x99 authority under the CRA to issue\nim plem enting regulations includes th e authority to impose an obligation, enforce\xc2\xad\nable under \xc2\xa7 1818, to meet community credit needs that was not imposed by Con\xc2\xad\ngress.\nThe agencies\xe2\x80\x99 rulemaking authority is limited to \xe2\x80\x9ccarrying] out the\npurposes\xe2\x80\x9d o f the CRA, 12 U.S.C. \xc2\xa7 2905, and those purposes are limited to re\xc2\xad\nquiring the agencies to use their authority to \xe2\x80\x9cencourage\xe2\x80\x9d financial institutions to\nhelp m eet com m unity credit needs, 12 U.S.C. \xc2\xa7 2901(b).\nThe authority to\n\xe2\x80\x9cencourage\xe2\x80\x9d does not include the authority to impose an obligation enforceable by\ncease-and-desist orders and money penalties. See N ew York v. H eckler , 719 F.2d\n1191, 1196 (2nd Cir. 1983) (holding that statutory language directing entities re\xc2\xad\nceiving federal funding \xe2\x80\x9cto encourage family participation\xe2\x80\x9d in m inors\xe2\x80\x99 receipt of\ncontraceptive services did not authorize HHS to promulgate regulations requiring\nparental notification following a m inor\xe2\x80\x99s purchase of contraception).\nW e em phasize that our conclusion that \xc2\xa7 1818 sanctions are not available is\nnot intended to suggest that the provisions of the proposed CRA regulations re\xc2\xad\ngarding an obligation to help meet the credit needs of the community are invalid\nfor other purposes under the CRA or any other statute, such as to assist the exercise\nof agency authority during examinations and in the application process. Nor is it\n254\n\n\x0cA uthority o f the F ederal F inancial Supervisory A gencies U nder the C om m unity R einvestm ent A ct\n\nintended to suggest that other provisions of the proposed CRA regulations impos\xc2\xad\ning requirements on financial institutions, such as data collection and reporting\nrequirements, are not authorized by the grant of authority to promulgate regula\xc2\xad\ntions. Moreover, we express no opinion on the availability of \xc2\xa7 1818 sanctions for\nviolations of a law, rule, or regulation in any context other than the CRA.\n\nIV.\nThe purpose of the CRA is to require the federal financial supervisory agencies,\nin the execution of their examination function, to encourage financial institutions to\nmeet community credit needs. The CRA requires that the agencies assess financial\ninstitutions\xe2\x80\x99 records in this regard and consider their records when evaluating their\napplications for deposit facilities. In connection with this requirement, the agen\xc2\xad\ncies may promulgate regulations placing reasonable requirements on financial in\xc2\xad\nstitutions to enable the agencies to assess their performance. W e conclude,\nhowever, that the agencies lack authority under the CRA to provide by regulation\nthat financial institutions that do not meet the credit needs of their communities\nmay be subject to enforcement actions under 12 U.S.C. \xc2\xa7 1818.\n\nW ALTER D ELLINGER\nA ssistan t A ttorn ey G en eral\nOffice o f L egal C ounsel\n\n255\n* U .S . QOVERJWB1T PRINTING OFFICE: 1 9 9 9 -4 4 7 -3 9 0\n\n\x0c'