Court Opinion

ID: 4271300
Source: CourtListenerOpinion
Date Created: 2018-05-01 00:00:48.314983+00
Date Added: 2024-06-11T14:32:46.054560
License: Public Domain

UNITED STATES DISTRICT COURT
                             FOR THE DISTRICT OF COLUMBIA

    CONFERENCE OF STATE BANK
    SUPERVISORS,

                Plaintiff,

         v.                                                Civil Action No. 17-0763 (DLF)

    OFFICE OF THE COMPTROLLER OF
    THE CURRENCY, et al.,

                Defendants.

                                  MEMORANDUM OPINION

        Before the Court is the Defendants’ Motion to Dismiss. Dkt. 9. For the reasons that

follow, the Court will grant the motion.

I. BACKGROUND

        In this action, the Conference of State Bank Supervisors (CSBS) challenges the purported

Nonbank Charter Decision of the Office of the Comptroller of the Currency and the Comptroller1

(collectively, the OCC). CSBS is a nationwide organization of state banking and financial

services regulators from all fifty U.S. states, the District of Columbia, Guam, Puerto Rico, the

U.S. Virgin Islands, and American Samoa. Compl. ¶ 13, Dkt. 1. The OCC is a bureau of the

U.S. Department of the Treasury and functions as the primary supervisor of banks with national

charters. Id. ¶ 16; see also 12 U.S.C. §§ 1, 26–27 (establishing the OCC and empowering it to

grant national bank charters to entities that carry on “the business of banking”).

1
 This case was originally brought against Thomas J. Curry in his official capacity as
Comptroller of the Currency. When the current Comptroller, Joseph M. Otting, was sworn in on
November 27, 2017, Otting was automatically substituted as a defendant pursuant to Rule 25(d)
of the Federal Rules of Civil Procedure.
       Financial regulation in the United States is shared between federal and state governments.

Compl. ¶ 27. As a general matter, a bank may choose to pursue a state or national charter, and

the bank will then be regulated primarily by the corresponding authority. Id. ¶ 21. Through the

challenged Nonbank Charter Decision, the OCC allegedly decided to move forward with a

process for considering national bank charter applications from companies that provide bank-like

services but do not accept deposits, which have historically been regulated by the states. See id.

¶¶ 1, 3, 5, 26. Such firms have experienced “explosive growth” in recent years. Id. ¶ 4. Many

of them are financial technology companies, or Fintechs, that provide technology-driven

financial services. Id. ¶¶ 2–4. For example, a Fintech might develop new ways to provide

traditional services like payment processing, or a Fintech might develop cutting-edge services

like crowd funding and digital currencies. Id. ¶ 2. The OCC estimates that there are now more

than 4,000 Fintechs in the United States and the United Kingdom, fueled by worldwide

investment that has increased from $1.8 billion to $24 billion in the last five years. Id. ¶ 4.

       The National Bank Act governs any decision to grant national bank charters to Fintechs

or other firms that do not accept deposits. Under the Act, “the Comptroller shall examine into

the condition” of charter applicants and determine whether each applicant’s condition “entitle[s]

it to engage in the business of banking.” 12 U.S.C. § 26. If a charter applicant “is lawfully

entitled to commence the business of banking,” the OCC shall issue a national charter. Id. § 27.

Also, the OCC is authorized to prescribe rules and regulations to carry out its chartering

responsibilities. Id. § 93a. National charters apply a uniform set of requirements to national

charter recipients and exempt recipients from uneven state regulatory landscapes. Compl. ¶ 23.

Historically, the OCC has granted national charters only to banks that receive deposits or other

special purpose banks specifically authorized by statute. See 12 U.S.C. § 27; 12 U.S.C.

                                                  2
§ 1841(c)(2)(D), (F) (authorizing trust banks, banker’s banks, and credit card banks); Compl.

¶¶ 38–46. Indeed, CSBS does not allege that a single national charter has been granted to an

entity that does not receive deposits, and the OCC confirms the same. See Defs.’ Mem. at 14,

Dkt. 9-2.

        In 2003, the OCC promulgated a rule interpreting its chartering authority to include the

power to charter a special purpose bank that limits its activities to “any . . . activities within the

business of banking,” provided that the special purpose bank conducts “at least one of the

following three core banking functions: Receiving deposits; paying checks; or lending money.”

12 C.F.R. § 5.20(e)(1); see Rules, Policies, and Procedures for Corporate Activities; Bank

Activities and Operations; Real Estate Lending and Appraisals, 68 Fed. Reg. 70122 (Dec. 17,

2003); Compl. ¶ 55. Under the rule, the OCC could charter a special purpose bank that does not

receive deposits, so long as the bank pays checks or lends money. That may open the door

(assuming other requirements are met) for a Fintech that does not accept deposits to acquire a

national charter.

        That particular aspect of the 2003 rule lay dormant for more than a decade. But in March

2016, the OCC announced through a white paper that it had begun to study the regulatory

impacts of innovations in financial technology. Compl. ¶ 47 (citing Office of the Comptroller of

the Currency, Supporting Responsible Innovation in the Federal Banking System: An OCC

Perspective (Mar. 2016), www.occ.gov/publications/publications-by-type/other-publications-

reports/pub-responsible-innovation-banking-system-occ-perspective.pdf). In a December 2016

speech, then-Comptroller Curry said that “the OCC will move forward with chartering financial

technology companies that offer bank products and services and meet our high standards and

chartering requirements.” Thomas J. Curry, Special Purpose National Bank Charters for Fintech

                                                   3
Companies (Dec. 2, 2016), Dkt. 1-2 at 4 (emphasis in remarks as published on the OCC’s

website). According to Curry, “I have asked staff to develop and implement a formal agency

policy for evaluating applications for fintech charters. The policy, informed by the comments we

receive on our [forthcoming] white paper, will articulate specific criteria for approval as well as

issues that we should consider and conditions that should be met before granting such charters.”

Id. at 6.

        Soon after, the OCC published a white paper that outlined general “baseline” supervisory

requirements for charter holders. Office of the Comptroller of the Currency, Exploring Special

Purpose National Bank Charters for Fintech Companies (Dec. 2016), Dkt. 1-3; see also Compl.

¶ 56–57. This white paper solicited public feedback, and many parties registered objections.

Compl. ¶¶ 58–66. CSBS itself raised a variety of concerns relating to the lawfulness and

wisdom of granting national charters to Fintechs. Letter from CSBS to Comptroller Curry (Jan.

13, 2017), Dkt. 1-4; see also Compl. ¶ 65. The OCC published a response to these concerns on

March 15, 2017. Office of the Comptroller of the Currency, OCC Summary of Comments and

Explanatory Statement: Special Purpose National Bank Charters for Financial Technology

Companies (2017), Dkt. 1-6.

        On the same day, the OCC published a draft supplement to the Comptroller’s Licensing

Manual. See Office of the Comptroller of the Currency, Evaluating Charter Applications from

Financial Technology Companies (Mar. 2017), Dkt 1-5; see also Compl. ¶ 67. The draft

supplement pointed to 12 C.F.R. § 5.20(e)(1) to suggest that Fintechs that do not take deposits

eventually may be allowed to apply for national charters if the OCC finalizes the language in the

draft. Compl. ¶¶ 67–68. In addition, the draft supplement invited public feedback. Id. ¶ 74.

Many parties again registered concerns and objections. Id. ¶¶ 74–75.

                                                 4
          The OCC did not respond to these concerns and did not change the draft status of the

supplement between March 15 and April 26, 2017, see id. ¶ 76, on which date CSBS filed this

challenge to the OCC’s purported decision to move forward with chartering national banks that

do not accept deposits, i.e., the Nonbank Charter Decision, see id. at 31, ¶ 12. CSBS asserts five

claims: (1) the OCC does not have statutory authority for the Nonbank Charter Decision; (2) the

OCC does not have statutory authority for a corresponding regulation; (3) the Nonbank Charter

Decision failed to follow the appropriate rulemaking procedures; (4) the Nonbank Charter

Decision was arbitrary and capricious; and (5) the Nonbank Charter Decision violated the Tenth

Amendment. See id. ¶¶ 99–121.

          Since CSBS filed its complaint, a number of developments have occurred. The OCC has

undergone two leadership changes along with the changing presidential administrations, so Curry

is no longer Comptroller: he was succeeded in May 2017 by Acting Comptroller Keith A.

Noreika, who was then succeeded by the current Senate-confirmed Comptroller Joseph M.

Otting. The OCC’s new leadership suggested that, even if a Fintech attempted to apply, the

OCC may not accept the application. In July 2017, for example, Acting Comptroller Noreika

stated:

          [A]t this point the OCC has not determined whether it will actually accept or act
          upon applications from nondepository fintech companies for special purpose
          national bank charters that rely upon [12 C.F.R. 5.20(e)(1)]. And, to be clear, we
          have not received, nor are we evaluating, any such applications from nondepository
          fintech companies. The OCC will continue to hold discussions with interested
          companies while we evaluate our options. These meetings have been very
          informative and provide insight into the financial landscape and the companies
          providing traditional banking services as they continue to evolve.

Keith A. Noreika, Public Remarks before the Exchequer Club (July 19, 2017), Dkt. 9-3 at 10.

Also in the time since the complaint was filed, a similar lawsuit was filed against the OCC in the

Southern District of New York by Maria Vullo, Superintendent of the New York State

                                                  5
Department of Financial Services. Vullo v. OCC, No. 17-cv-3574, 2017 WL 6512245 (S.D.N.Y.

Dec. 12, 2017). The Southern District recently dismissed that case, concluding that the plaintiff

lacked standing and that the dispute was not ripe. Id. at *8–10.

        The OCC now moves to dismiss this action under Rules 12(b)(1) and 12(b)(6) of the

Federal Rules of Civil Procedure. Dkt. 9.

II. LEGAL STANDARD

        The U.S. Constitution limits the federal courts to deciding cases or controversies, U.S.

Const. art. III, § 2, and it is “presumed that a cause lies outside this limited jurisdiction,”

Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994); Attias v. Carefirst, Inc., 865 F.3d
620, 625 (D.C. Cir. 2017). To present a justiciable case or controversy, the party invoking

federal jurisdiction must demonstrate standing and ripeness, among other requirements.

Kokkonen, 511 U.S. at 377; Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992); Pub. Citizen,

Inc. v. NHTSA, 489 F.3d 1279, 1289 (D.C. Cir. 2007).

        A motion to dismiss for lack of standing proceeds under Rule 12(b)(1) because “the

defect of standing is a defect in subject matter jurisdiction.” Haase v. Sessions, 835 F.2d 902,

906 (D.C. Cir. 1987). Similarly, motions to dismiss on ripeness grounds consistently proceed

under Rule 12(b)(1) because “[t]he question of ripeness goes to . . . subject matter jurisdiction.”

Exxon Mobil Corp. v. FERC, 501 F.3d 204, 207 (D.C. Cir. 2007) (quoting Duke City Lumber Co.

v. Butz, 539 F.2d 220, 221 n.2 (D.C. Cir. 1976)); see also Venetian Casino Resort, LLC v. EEOC,

409 F.3d 359, 366 (D.C. Cir. 2005); Beach TV Props., Inc. v. Solomon, 254 F. Supp. 3d 118, 131

(D.D.C. 2017); Matthew A. Goldstein, PLLC v. U.S. Dep’t of State, 153 F. Supp. 3d 319, 330

                                                   6
(D.D.C. 2016), aff’d, 851 F.3d 1 (D.C. Cir. 2017); Belmont Abbey Coll. v. Sebelius, 878 F. Supp.
2d 25, 32 (D.D.C. 2012).2

       When evaluating a Rule 12(b)(1) motion, “the court must treat the plaintiff’s factual

allegations as true and afford the plaintiff the benefit of all inferences that can be derived from

the facts alleged.” Jeong Seon Han v. Lynch, 223 F. Supp. 3d 95, 103 (D.D.C. 2016) (quotation

marks and citation omitted). The court, however, “must scrutinize the plaintiff’s allegations

more closely when considering a motion to dismiss pursuant to Rule 12(b)(1) than it would

under a motion to dismiss pursuant to Rule 12(b)(6).” Schmidt v. U.S. Capitol Police Bd., 826 F.

Supp. 2d 59, 65 (D.D.C. 2011). Also, unlike the Rule 12(b)(6) context, a court may consider

documents outside the pleadings to evaluate whether it has jurisdiction; for example, the court

may consider the complaint supplemented by undisputed facts evidenced by the record. See

Jerome Stevens Pharm., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005); Venetian Casino,
409 F.3d at 366; Herbert v. Nat’l Acad. of Scis., 974 F.2d 192, 197 (D.C. Cir. 1992). If the court

determines that it lacks jurisdiction, the court must dismiss the action. U.S. Const. art. III, § 2;

Fed. R. Civ. P. 12(b)(1), 12(h)(3).

2
  It is true that “not every justiciability concern is one of subject matter jurisdiction” and “the
D.C. Circuit recently clarified that certain justiciability questions are governed by Rule 12(b)(6),
rather than Rule 12(b)(1), while at the same time acknowledging that it ‘has not always been
consistent in maintaining’ the ‘distinction between a claim that is not justiciable and a claim over
which the court lacks subject matter jurisdiction.’” Goldstein, 153 F. Supp. 3d at 331 n.9
(alterations omitted) (quoting Sierra Club v. Jackson, 648 F.3d 848, 853 (D.C. Cir. 2011)).

Therefore, even though numerous ripeness cases proceed under Rule 12(b)(1), it is possible that
a motion to dismiss a claim that is prudentially unripe, but not constitutionally unripe, should
proceed under Rule 12(b)(6). See id.; Horne v. U.S. Dep’t of Agric., 569 U.S. 513, 526 (2013)
(noting that prudential ripeness “is not, strictly speaking, jurisdictional”). Regardless, the Court
need not resolve the issue at this time because the defendants moved to dismiss under both rules,
see Dkt. 9, and an analysis under Rule 12(b)(6) would not change the Court’s ripeness
conclusion.

                                                  7
III. ANALYSIS

       A.      Standing

       The doctrine of standing limits federal courts to “the traditional role of Anglo-American

courts, which is to redress or prevent actual or imminently threatened injury to persons caused by

private or official violation of law.” Summers v. Earth Island Inst., 555 U.S. 488, 492 (2009).

To establish constitutional standing, a plaintiff must demonstrate a concrete injury-in-fact that is

fairly traceable to the defendant’s action and capable of being redressed by a favorable judicial

decision. Id. at 493. Absent an actual or imminently threatened injury, the court may not “step[]

where the Constitution forb[ids] it to tread” by addressing the merits. Hancock v. Urban

Outfitters, Inc., 830 F.3d 511, 513 (D.C. Cir. 2016).

       An organization like CSBS “can have standing on its own behalf . . . or on behalf of its

members.” Abigail All. for Better Access to Developmental Drugs v. Eschenbach, 469 F.3d 129,

132 (D.C. Cir. 2006) (internal citations omitted). The former —“organizational standing”—

requires an organization to show that the organization itself was injured. Equal Rights Ctr. v.

Post Properties, Inc., 633 F.3d 1136, 1138 (D.C. Cir. 2011) (internal quotations omitted). The

latter—“associational standing”—allows an organization to sue on behalf of its members to

protect their interests. Common Purpose USA, Inc. v. Obama, 227 F. Supp. 3d 21, 26–27

(D.D.C. 2016).

        CSBS seeks entry into the federal courts through the latter path. To establish

associational standing, CSBS must show that (1) “its members would otherwise have standing to

sue in their own right”; (2) “the interests it seeks to protect are germane to the organization’s

purpose”; and (3) “neither the claim asserted nor the relief requested requires the participation of

individual members in the lawsuit.” United Food & Commercial Workers Union Local 751 v.

                                                  8
Brown Grp., 517 U.S. 544, 553 (1996) (quotation marks omitted); see Sierra Club v. EPA, 292
F.3d 895, 898 (D.C. Cir. 2002) (applying test).

       CSBS’s members do not have standing to sue in their own right. Standing’s “irreducible

constitutional minimum” contains three requirements. Steel Co. v. Citizens for a Better Env’t,

523 U.S. 83, 102–03 (1998). First, a plaintiff must plead an injury that is “concrete,

particularized, and actual or imminent.” Clapper v. Amnesty Int’l USA, 568 U.S. 398, 409

(2013). “Although imminence is concededly a somewhat elastic concept, it cannot be stretched

beyond its purpose, which is to ensure that the alleged injury is not too speculative for Article III

purposes.” Id. (internal quotations omitted). “Second, there must be causation—a fairly

traceable connection between the plaintiff’s injury and the complained-of conduct of the

defendant.” Steel Co., 523 U.S. at 103. “And third, there must be redressability—a likelihood

that the requested relief will redress the alleged injury.” Id. “This triad of injury in fact,

causation and redressability constitutes the core of Article III’s case-or-controversy requirement,

and the party invoking federal jurisdiction bears the burden of establishing its existence.” Id. at

103–04 (quoting Lujan, 504 U.S. at 560).

       The Court only needs to reach the first requirement—injury in fact—to resolve this case.

The U.S. Supreme Court has “repeatedly reiterated that threatened injury must be certainly

impending to constitute injury in fact, and that allegations of possible future injury are not

sufficient.” Clapper, 568 U.S. at 409 (internal quotation marks and citation omitted). And it has

rejected standards that would allow for possible future injuries or future injuries with merely an

“objectively reasonable likelihood” of occurring. Id. (rejecting Second Circuit test using that

language). In a limited set of cases, the U.S. Supreme Court has “found standing based on a

‘substantial risk’ that the harm will occur, which may prompt plaintiffs to reasonably incur costs

                                                   9
to mitigate or avoid that harm.” Clapper, 568 U.S. at 414 n.5; see Susan B. Anthony List v.

Driehaus, 134 S. Ct. 2334, 2341 (2014). The “substantial risk” test does not replace the

“certainly impending” test, but rather provides an alternate standard that looks for costs incurred

“to mitigate or avoid that harm.” Clapper, 568 U.S. at 414 n.5; see Attias, 865 F.3d at 625–27.

Although the two tests may involve similar inquires, they remain separate tests. See Attias, 865
F.3d at 626–27; id. at 627 (“Under our precedent, the proper way to analyze an increased-risk-of-

harm claim is to consider the ultimate alleged harm . . . as the concrete and particularized injury

and then to determine whether the increased risk of such harm makes injury to an individual

citizen sufficiently imminent for standing purposes.” (internal quotation marks omitted)). Under

either standard, “standing is ‘substantially more difficult to establish’ where the parties invoking

federal jurisdiction are not ‘the object of the government action or inaction’ they challenge.”

Pub. Citizen, Inc., 489 F.3d at 1289–90 (quoting Lujan, 504 U.S. at 562).

       CSBS fails to plead an injury that is “certainly impending” or that exposes its members to

a “substantial risk.” The complaint identifies several potential injuries:

       •   “The Nonbank Charter Decision triggers significant risks to traditional areas of
           state concern . . . .” Compl. ¶ 92.

       •   “The Nonbank Charter Decision threatens to disrupt this system” of dual bank
           enforcement.” Id. ¶ 93.

       •   “[C]ompanies facing or at risk of state enforcement actions could escape state
           enforcement authority by obtaining a national charter.” Id. ¶ 94.

       •   “[T]he OCC’s actions impede the states’ ability to continue their existing
           regulation of financial services companies within their borders . . . . This also
           creates difficulties for the states in detecting unlicensed activity within their
           borders.” Id.

                                                 10
       •   “[O]ne reason that nonbank companies may seek a special purpose national
           charter from the OCC would be to avoid compliance with existing state laws.”
           Id. ¶ 95.

       •   The decision “threatens to preempt state sovereign interests.” Id. ¶ 96.

This list is filled with speculative and conclusive language like “significant risks”; “threatens to

disrupt”; “could escape”; and “may seek.” The Court accepts as true the complaint’s factual

assertions, including that the OCC’s chartering of a Fintech would diminish a state’s “ability to

continue [its] existing regulation” and will make it marginally more difficult to detect

“unlicensed activity.” And regulatory interference with a state is indeed a concrete and

particularized injury. See Alaska v. U.S. Dep’t of Transp., 868 F.2d 441 (D.C. Cir. 1989).

       But each of those harms is contingent on whether the OCC charters a Fintech. As the

Southern District of New York explained when reaching the same conclusion with respect to

similar alleged harms, “none of [the] alleged injuries will actually occur if the OCC never . . .

[charters] a [F]intech.” Vullo, 2017 WL 6512245, at *7–8. Several contingent and speculative

events must occur before the OCC charters a Fintech: (1) the OCC must decide to finalize a

procedure for handling those applications; (2) a Fintech company must choose to apply for a

charter; (3) the particular Fintech must substantively satisfy regulatory requirements; and (4) the

OCC must decide to grant the charter to the particular Fintech. When the complaint was filed,

not even the first step—finalized procedures—had occurred. See Wheaton Coll. v. Sebelius, 703
F.3d 551, 552 (D.C. Cir. 2012) (“[S]tanding is assessed at the time of filing.”). The draft

supplement was a draft “issue[d] for public comment” and it “explain[ed] how the OCC would

evaluate applications from fintech companies” in an “envisioned application process.” Office of

the Comptroller of the Currency, Summary of Comments and Explanatory Statement: Special

Purpose National Bank Charters for Financial Technology Companies (Mar. 2017), Dkt. 1-6 at

                                                 11
3–4, 17 (emphasis added). And the second step—a Fintech’s electing to apply—had not

occurred, let alone the third or fourth. In fact, an aspiring Fintech that does not accept deposits

plausibly could have attempted to apply for a charter anytime since the 2003 regulations took

effect. And yet in the almost fifteen years between those regulations and the complaint, the OCC

posits—and CSBS does not plead otherwise—that not one Fintech of the type described by the

complaint has attempted to apply for a national charter. See Defs.’ Mem. at 14.

       This chain of speculative events that must take place before a CSBS member is injured

fails to clear the bar posed by either the “certainly impending” test or the “substantial risk” test.

The possibility of future injury is too attenuated and uncertain to be “certainly impending.” And

CSBS does not allege in more than a conclusory fashion that its members suffer an injury from a

“substantial risk” of harm, and CSBS certainly does not allege that any such risk “may prompt

[its members] to reasonably incur costs to mitigate or avoid that harm.” Clapper, 568 U.S. at

414 n.5. Indeed, CSBS does not point to any expenditures or any other efforts taken by a

member state to mitigate or avoid the alleged harm. See Compl. ¶¶ 92–96. Furthermore, the

present case is unlike the U.S. Supreme Court’s recent application of the “substantial risk” test in

Susan B. Anthony List, 134 S. Ct. 2334. That case dealt with pre-enforcement review of a state

statute prohibiting false statements during elections, not speculative infringement upon state

regulations. Id. at 2347. Moreover, the injury in that case was much less attenuated; the Court

noted that the applicable commission likely “handle[d] about 20 to 80 false statement complaints

per year.” Id. at 2345 (quotation marks omitted). If the OCC had received 20 to 80 Fintech

charter applications, then CSBS would have a much stronger argument for standing. But not a

single Fintech has ever applied for a charter. Because it is not “certainly impending” that this

                                                  12
chain of events will take place and the present situation does not expose CSBS to a “substantial

risk” of harm, CSBS fails to establish injury in fact.

       To resist this conclusion, CSBS seeks refuge in several cases that allow states to show

regulatory injuries. Pl.’s Opp’n at 21–24, Dkt. 14. Ultimately, this effort is not persuasive

because it cannot cure CSBS’s lack of an imminent injury. CSBS argues that a state may sue the

federal government when it alleges “a judicially cognizable interest in the preservation of its own

sovereignty, and a diminishment of that sovereignty by the alleged [federal] interference.”

Bowen v. Pub. Agencies Opposed to Soc. Sec. Entrapment, 477 U.S. 41, 51 n.17 (1986) (internal

quotations marks omitted). Indeed, the D.C. Circuit has allowed states to challenge the

“preemptive effect” of federal law. Alaska, 868 F.2d at 443 n.1, 444. Other circuits have

reached similar conclusions. See Texas v. EEOC, 827 F.3d 372, 378, 379 (5th Cir. 2016),

withdrawn on other grounds, 838 F.3d 511 (5th Cir. 2016); Wyoming ex rel. Crank v. United

States, 539 F.3d 1236 (10th Cir. 2008); Ohio ex rel. Celebrezze v. U.S. Dep’t of Transp., 766
F.2d 228 (6th Cir. 1985).

       Unlike the state in Alaska, however, CSBS does not allege federal preemption. That is,

CSBS does not assert that any state law has been preempted by the OCC’s preliminary activities

respecting Fintech charters. CSBS also does not allege that any Fintech can freely ignore state

law because of the OCC’s statements. Nor does it argue that any particular state will face

increased regulatory costs and is an object of the regulatory action. See Texas, 827 F.3d at 378–

80 (allowing Texas to challenge EPA guidance because Texas was an object of the guidance and

was forced to incur significant costs or change its policies). Finally, there is no direct conflict

between federal and state laws as in Wyoming. See 539 F.3d 1236 (10th Cir. 2008) (challenging

                                                  13
interpretation of federal law that Wyoming residents could be prosecuted for gun ownership after

they had used a state process to expunge their state criminal records).

       The OCC’s national bank chartering program does not conflict with state law until a

charter has been issued. The Court thus agrees with the Southern District of New York that

“[a]ny allegation of preemption at this point relies on speculation about the OCC’s future

actions.” Vullo, 2017 WL 6512245, at *7–8. There is no doubt that if the OCC were to charter a

Fintech, then that national charter would preempt conflicting state laws—even the OCC

concedes as much. Defs.’ Reply, at 14, Dkt. 15. At that point, the impacted state surely may

allege an injury in fact. Alaska, 868 F.2d at 443 n.1, 444. But no such charter has been issued.

And, as above, CSBS has failed to allege that the OCC will issue a charter imminently or that the

OCC’s preliminary activities expose its members to a substantial risk of harm.

       Nor does the “special solicitude” afforded to states confer standing on CSBS. See

Massachusetts v. EPA, 549 U.S. 497, 518–20 (2007). In Massachusetts, the U.S. Supreme Court

took pains to identify an injury in fact: environmental changes had “already inflicted significant

harms,” including “rising seas” that “ha[d] already begun to swallow Massachusetts’ coastal

land” and harmed the state as a landowner. Id. at 521–22. Indeed, the “special solicitude

[described in Massachusetts v. EPA] does not eliminate the state petitioner’s obligation to

establish a concrete injury, as [the Court’s] opinion amply indicates.” Del. Dep’t of Natural Res.

& Envtl. Control v. FERC, 558 F.3d 575, 579 n.6 (D.C. Cir. 2009). Massachusetts had already

suffered an injury, but CSBS’s members have not.

       Even if the OCC were sufficiently likely to issue a charter to some particular Fintech, the

complaint would remain inadequate for another reason. CSBS raises standing on behalf of its

members. To do so, CSBS must plead an imminent injury to some particular member.

                                                14
Summers, 555 U.S. at 499. “In part because of the difficulty of verifying the facts upon which

such probabilistic standing depends,” a plaintiff organization must “identify members who have

suffered the requisite harm—surely not a difficult task here, when so many . . . are alleged to

have been harmed.” Summers, 555 U.S. at 499 (emphasis added). “When a petitioner claims

associational standing, it is not enough to aver that unidentified members have been injured.

Rather the petitioner must specifically ‘identify members who have suffered the requisite

harm.’” Chamber of Commerce v. EPA, 642 F.3d 192, 199 (D.C. Cir. 2011) (quoting Summers,
555 U.S. at 499). And at least three courts in this district have required an associational plaintiff

to identify an injured member by name at the motion to dismiss stage. See Western Wood

Preservers Inst. v. McHugh, 925 F. Supp. 2d 63, 69–70 (D.D.C. 2013); Californians for

Renewable Energy v. U.S. Dep’t of Energy, 860 F. Supp. 2d 44, 48 (D.D.C. 2012); Common

Cause v. Biden, 909 F. Supp. 2d 9, 21 n.6 (D.D.C. 2012); see also Am. Ass’n of Cosmetology

Schs. v. Devos, 258 F. Supp. 3d 50, 66–69 (D.D.C. 2017) (describing disagreements among

lower courts as to whether a plaintiff association must identify the injured member by name or

identify the member to some lesser degree).

       CSBS fails to identify in its complaint which particular member of the organization has

been harmed. Nor do any of the briefs remedy this concern. Compare Pl.’s Opp’n at 7–8 n.1,

with Defs.’ Reply at 10 n.1. In this way, the complaint runs afoul of the baseline requirement to

identify a particular member of the organization that was injured. As in Summers, identifying a

particular member is “surely not a difficult task” when the harms are alleged to apply to nearly

every member of the organization. 555 U.S. at 499. And here the identification requirement

serves an important gatekeeping role. It highlights the challenge of determining whether any

particular state will be injured before a particular Fintech, if any, receives a charter. A national

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charter could injure Indiana without injuring Alaska, or vice versa. As it stands, the complaint

does not equip the Court to decide which state to consider when evaluating standing, what role

the CSBS member has in that state’s regulatory system, or whether there are any Fintech

companies within that state that are likely to receive a national charter. And the identification

requirement ensures that the Court considers the likelihood of injury to individual members of

the organization, thus preventing the organization from gaining standing by combining several

alleged injuries that are inadequate separately.

       In conclusion, a plaintiff must demonstrate that it has standing to survive a Rule 12(b)(1)

motion. Lujan, 504 U.S. at 561. CSBS does not carry its burden because it fails to plead an

injury in fact and it does not identify an injured member.

       B.      Ripeness

       In addition, this dispute is not constitutionally or prudentially ripe for determination.

“Ripeness is a justiciability doctrine designed ‘to prevent the courts, through avoidance of

premature adjudication, from entangling themselves in abstract disagreements over

administrative policies, and also to protect the agencies from judicial interference until an

administrative decision has been formalized and its effects felt in a concrete way by the

challenging parties.’” Nat’l Park Hospitality Ass’n v. U.S. Dep’t of Interior, 538 U.S. 803, 807–

08 (2003) (quoting Abbott Laboratories v. Gardner, 387 U.S. 136, 148–149 (1967)).

Constitutional ripeness is “subsumed” by standing’s injury-in-fact requirement. Am. Petroleum

Inst. v. EPA, 683 F.3d 382, 386 (D.C. Cir. 2012). This case is constitutionally unripe because the

CSBS has not established injury in fact, as explained in Section III.A.

       This case is also prudentially unripe. As a preliminary matter, CSBS argues that the

Court should not apply the prudential ripeness doctrine because the U.S. Supreme Court “cast

doubt” on the doctrine in Susan B. Anthony List, 134 S. Ct. 2334. Pl.’s Opp’n at 19. The
                                                   16
prudential ripeness doctrine is indeed in tension with the “virtual unflagging” obligation of a

federal court to hear cases within its jurisdiction. Lexmark Int’l, Inc. v. Static Control

Components, Inc., 134 S. Ct. 1377, 1386 (2014). Even so, the U.S. Supreme Court applied the

doctrine in Susan B. Anthony List and explicitly declined to decide whether prudential ripeness

was still good law. 134 S. Ct. at 2347. The D.C. Circuit continues to apply the prudential

ripeness doctrine. See Perry Capital LLC v. Mnuchin, 864 F.3d 591, 632–33 (D.C. Cir. 2017).

       The prudential ripeness doctrine asks whether a federal court “should decide a case.”

Am. Petroleum Inst., 683 F.3d at 386 (emphasis added). Even if a case is “constitutionally ripe,”

there may also be “prudential reasons for refusing to exercise jurisdiction.” Nat’l Park

Hospitality Ass’n, 538 U.S. at 808; Goldstein, 153 F. Supp. 3d at 337 (stating that prudential

ripeness “may provide an independent basis for a court not to exercise its jurisdiction” (quotation

marks omitted)). The prudential ripeness doctrine asks two questions: (1) whether the issues are

fit for judicial decision; and (2) whether “withholding a decision will cause ‘hardship to the

parties.’” Am. Petroleum Inst., 683 F.3d at 387 (quoting Abbott Labs. v. Gardner, 387 U.S. 136,

149 (1967)).

       The first question protects “the agency’s interest in crystallizing its policy before that

policy is subjected to judicial review and the court’s interests in avoiding unnecessary

adjudication and in deciding issues in a concrete setting.” Wyo. Outdoor Council v. U.S. Forest

Serv., 165 F.3d 43, 49 (D.C. Cir. 1999) (internal quotation mark omitted). The fitness of an issue

“depends on whether it is purely legal, whether consideration of the issue would benefit from a

more concrete setting, and whether the agency’s action is sufficiently final.” Atl. States Legal

Found. v. EPA, 325 F.3d 281, 284 (D.C. Cir. 2003) (internal quotation marks omitted).

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       This dispute would benefit from a more concrete setting and additional percolation. In

particular, this dispute will be sharpened if the OCC charters a particular Fintech—or decides to

do so imminently. CSBS admits that Fintechs “encompass any of a very broad array of

technology-driven financial services providers . . . that range from start-up ventures to well-

established conglomerates.” Compl. ¶ 2. The term can include an “almost unimaginably wide

variety of services, from the traditional (e.g., payment processing) to the more cutting edge (e.g.,

crowd funding and digital currencies, such as bitcoins).” Id. To address whether the OCC can

issue Fintech charters may require the Court to imagine the “unimaginably wide” range of

possible Fintechs, and to draw distinctions between them. Courts are ill-equipped to

prospectively draw lines as to which hypothetical Fintechs, if any, may be chartered. While a

court could readily consider the legality of awarding a charter to a particular Fintech, the current

dispute does not present that question.

       Moreover, CSBS asks the Court to review the agency’s procedures. But, as discussed in

Section III.A, any procedures that may lead to issuing a Fintech charter have not yet been

finalized. Based on the record before the Court, the OCC’s supplement to the chartering manual

remains in draft form, awaiting subsequent updates. See Office of the Comptroller of the

Currency, Evaluating Charter Applications from Financial Technology Companies (Mar. 2017),

Dkt 1-5; see also Compl. ¶¶ 67, 76. And there are many other procedural hurdles to overcome

before a charter could be granted. See Defs.’ Mem. at 12–13 (explaining briefly some chartering

procedures, such as application, public comment, analysis, and a conditional approval process,

which are set forth in 12 C.F.R. Part 5). Any procedural review at this point would be

piecemeal, potentially involving a new legal challenge every time the OCC takes a step towards

a result disfavored by a trade organization. In light of the recent leadership changes at the OCC,

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it is particularly speculative to guess whether the OCC will continue down paths considered by a

previous Comptroller. The OCC may pursue similar ends through different regulatory means, or

the OCC may choose not to move forward with a national charter program for Fintechs. Indeed,

then-Acting Comptroller Noreika stated in July 2017 that “the OCC has not determined whether

it will actually accept or act upon applications from nondepository fintech companies” and the

OCC “will continue to hold discussions with interested companies while we evaluate our

options.” Keith A. Noreika, Public Remarks before the Exchequer Club (July 19, 2017), Dkt. 9-

3 at 10; see also Wheaton Coll., 703 F.3d at 552 (assessing ripeness based in part on events that

occurred after the filing of the complaint). As a result, the agency’s actions are not yet

sufficiently settled to be fit for review.

        In addition, while purely legal issues are “presumptively reviewable,” even “purely legal

issues may be unfit for review.” Nat’l Ass’n of Home Builders v. U.S. Army Corps of Eng’rs,

417 F.3d 1272, 1282 (D.C. Cir. 2005) (quotation omitted). This dispute presents legal issues that

are unfit for review. In particular, the dispute involves the interpretation of statutes entrusted to

the OCC, and both parties brief the issue of Chevron deference. And for that reason “[i]t is more

consistent with the conservation of judicial resources to make that deference-bound review after

the agency has finalized its application of the relevant statutory text.” Am. Petroleum Inst., 683
F.3d at 389 (emphasis added). If the OCC elects to adopt and apply a regulatory scheme to a

particular Fintech charter, then the agency action will become sufficiently settled and courts will

have a more concrete setting to resolve the legal disputes. In these ways, the dispute is not yet fit

for judicial decision. See Am. Petroleum Inst., 683 F.3d at 387.

        The second question asked by the prudential ripeness doctrine is whether withholding a

decision will cause hardship to the parties. See id. While the D.C. Circuit “has frequently

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suggested that hardship is not a sine qua non of ripeness,” Teva Pharms. USA, Inc. v. Sebelius,

595 F.3d 1303, 1310 (D.C. Cir. 2010) (collecting cases), it remains a consideration. The

“institutional interests in the deferral of review” are outweighed when the hardship caused by

deferral would be “immediate and significant.” Am. Petroleum Inst., 683 F.3d at 389. CSBS

makes no attempt to offer a reason why delay would cause it hardship, let alone that any hardship

would be “immediate and significant.” Id. Instead, CSBS argues that it need not provide any

reasons. See Pl.’s Opp’n at 20–21 (“[A]bsent institutional interests favoring postponement of

review, a petitioner need not show that delay would impose individual hardship to show

ripeness.” (quoting Sabre, Inc. v. U.S. Dep’t of Transp., 429 F.3d 1113, 119–20 (D.C. Cir.

2005)). This argument is not persuasive when considered against the hardship to the OCC if

each minor step towards a potential agency policy were litigated one-by-one as the policy

becomes more settled.

       For these reasons, the prudential ripeness doctrine counsels in favor of allowing time to

sharpen this dispute before deciding it. Indeed, there may ultimately be no case to decide at all if

the OCC does not charter a Fintech. Therefore, even if CSBS had successfully alleged an injury

in fact, this case is prudentially unripe. See Vullo, 2017 WL 6512245, at *8–10 (reaching same

conclusion under similar Second Circuit precedent).

                                         CONCLUSION

       For the foregoing reasons, the Court grants the Defendants’ Motion to Dismiss. Dkt. 9.

A separate order consistent with this decision accompanies this memorandum opinion.

                                                             ________________________
                                                             DABNEY L. FRIEDRICH
                                                             United States District Judge
Date: April 30, 2018

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