Court Opinion

ID: 3004824
Source: CourtListenerOpinion
Date Created: 2015-09-25 18:01:22.349469+00
Date Added: 2024-06-11T11:39:16.238910
License: Public Domain

UNITED STATES DISTRICT COURT
                         FOR THE DISTRICT OF COLUMBIA

                                         )
COMMUNITY FINANCIAL SERVICES             )
ASSOCATION OF AMERICA, LTD.,             )
et al.,                                  )
                                         )
             Plaintiffs,                 )
                                         )
                   v.                    )    Case No. 14-CV-953 (GK)
                                         )
FEDERAL DEPOSIT INSURANCE                )
CORPORATION, et al.,                     )
                                         )
             Defendants.                 )
~~~~~~~~~~~~~~~~->

                                MEMORANDUM OPINION

      In    June   2014,        Plaintiffs· Community      Financial    Services

·Association of America,          Ltd.   ("CFSA")   and Advance America,     Cash

Advance     Centers,     Inc.     ("Advance    America")    filed   a   Complaint

against Defendants the Federal Deposit Insurance Corporation ("the

FDIC") , the Board of Governors of the Federal Reserve System ("the

Board") ,   and the Office of the Comptroller of the Currency and

Thomas J.    Curry,     in his official capacity as the Comptroller of

the   Currency     ("the    OCC").       Plaintiffs     seek   declaratory    and

injunctive relief to set aside certain informal guidance documents

and other actions by the            FDIC,    the Board,    and the OCC on the

grounds that they exceed the agencies'                statutory authority,    are

arbitrary and capricious, were promulgated without following the
procedures       required by            law,    and deprive     Plaintiffs         of    liberty

interests without due process of law.

         This matter is before the Court on Defendants'                            Motions to

Dismiss for Lack of Jurisdiction and for Failure to State a Claim

    (collectively,    "Motions          to     Dismiss")     [Dkt.    Nos.   16,        17,   18],

Plaintiffs'       Motion        for      Jurisdictional       Discovery      ("Motion          for

Discovery")       [ Dkt.     No.   25],        and Plaintiffs'       Motion for Leave to

File a Second Amended Complaint [Dkt. No. 56]. Upon consideration

of      the   motions,   1   oppositions,         replies,     surreplies,         notices      of

support, response,           the entire record herein, and for the reasons

stated below, the Motions to Dismiss are granted in part and denied

in part, the Motion for Discovery is denied,                          and the Motion for

Leave to File a Second Amended Complaint is granted.

I .      Background

         A.    Factual Overview2

         Plaintiff       CFSA      is    a      national   trade      organization            that

represents payday lenders and Plaintiff Advance America is a payday

1 See Section I. B, Procedural Background, infra, for a detailed
history of the relevant briefs and their shorthand citations.

2 Forpurposes of ruling on a motion to dismiss, the factual
allegations of the complaint must be presumed to be true and
liberally construed in favor of the plaintiff. Aktieselskabet AF
21. November 2001 v. Fame Jeans Inc., 525 F.3d 8, 15 (D.C. Cir.
2008); Shear v. Nat'l Rifle Ass'n of Am., 60u F.2d 1251, 1253 (D.C.
Cir. 1979). Therefore, the facts set forth herein are taken from
the First Amended Complaint. The Court is not required though, to
accept "a legal conclusion couched as a factual allegation" or

                                                  2
lender and member of CFSA. SAC           ~~   14-16. Payday lenders are by and

large licensed and regulated by the states, as well as some federal

consumer protection laws. Board Mot. at 3. The Dodd-Frank Act gave

the Consumer      Financial     Protection Bureau          ("CFPB")     authority to

supervise payday lenders and promulgate regulations pertaining to

payday lending. See       SAC~~      39-41; Dodd-Frank Act Wall Street Reform

and Consumer Protection Act,            12 U.S.C.    §    549l(a). CFPB is not a

party in this case.

      Defendant    FDIC    is    an    independent       agency   and   acts   as    the

primary federal regulator for certain state-chartered banks.                          In

that capacity,     the FDIC prescribes standards to promote banks'

safety and soundness,          and may do so by regulation or guideline.

The FDIC also examines banks,             prepares examination reports,              and

brings enforcement actions. See FDIC Mot. at 2; FDIC, Who is the

FDIC?, available at www.fdic.gov/about/learn/symbol.

      Defendant    OCC    is    an    independent    bureau       within    the     U.S.

Department of the Treasury that functions as the primary supervisor

of   federally    chartered      (national)     banks      and    savings   and     loan

associations. The OCC administers statutory provisions governing

most aspects of the federal banking system and has broad authority

to examine the safety and soundness of the banks it supervises.

inferences unsupported by the facts set forth in the complaint.
Trudeau v. Fed. Trade Comm'n, 456 F.3d 178, 193 (D.C. Cir. 2006).

                                          3
See     OCC     Mot.      at    5;      OCC,     About     the      OCC,     available        at

http://www.occ.gov/about.

        Defendant Board of Governors of the Federal Reserve System is

a federal agency authorized to regulate and examine bank holding

companies and state-chartered banks that are members of the Federal

Reserve System. State member banks that are regulated by the Board

are    also    regulated       by    state     banking     agencies.       See     Board Mot.

at 2-3.

        Payday lenders utilize the services of banks as part of their

business. For example, "[w]hen a prospective borrower applies for

the loan . . . he or she typically provides a post-dated check or

an electronic debit authorization for the value of the loan, plus

a fee.       The lender immediately advances the customer funds,                            then

after    a    specified        period    of    time,      usually    determined        by   the

customer's next payday, the borrower returns to repay the loan and

fee.    But    if   the    customer       does      not   return,    the     terms     of   the

transaction permit the lender to deposit the post-dated check or

to execute the debit authorization. In order to have that security,

the lender must have a deposit account with a bank and/or access

to the Automated Clearing House (ACH) network." SAC                         'II   28; see also

OCC Motion to Dismiss ("OCC Mot.")                  [Dkt. No. 18-1] at 1 ("a payday

lender    typically must            submit     checks provided by its               borrowers

through the payment system by causing the checks to be deposited

at a bank.")

                                                4
        Plaintiffs allege that Defendants participated and continue

to     participate      in     a    campaign     initiated      by   the     United       States

Department of Justice ("DOJ"),                  known as "Operation Choke Point,"

to     force    banks   to     terminate       their business        relationships           with

payday lenders. Operation Choke Point has recently been the subject

of a House Committee Investigation and reports. See SAC                              ~~   56-58;

STAFF OF H. COMM. ON OVERSIGHT & GOV'T REFORM, 113TH CONG., REP.

ON     THE   DEP' T OF       JUSTICE'S     "OPERATION     CHOKE       POINT":        ILLEGALLY

CHOKING        OFF LEGITIMATE         BUSINESSES?      (Comm.      Print     2014)        ("Comm.

Report"); STAFF OF H. COMM. ON OVERSIGHT AND GOV'T REFORM,                                 113TH

CONG.,       FEDERAL    DEPOSIT        INSURANCE     CORPORATION'S         INVOLVEMENT         IN

"OPERATION CHOKE POINT" (Comm. Pri,nt 2014)                     ("Comm. FDIC Report").

        Defendants allegedly forced banks to terminate relationships

with     Plaintiffs      and       Plaintiffs'      members   by     first    promulgating

regulatory        guidance         regarding    "reputation      risk,"      and by        later

relying on the reputation risk guidance "as the                            fulcrum for a

campaign of backroom regulatory pressure seeking to coerce banks

to terminate longstanding, mutually beneficial relationships with

all payday lenders." Pls.' Opp'n at 9.

        B.      Procedural Background

        On June 5,      2014,       Plaintiffs fil.ed their original Complaint

against Defendants asserting violations of the APA and due process

[Dkt. No.       1]. The First Amended Complaint was filed on July 30,

2014    ("FAC")    [Dkt. No.         12]. On August 18, 2014,           the Board filed

                                                5
.

    its Motion to Dismiss for Lack of Jurisdiction, or Alternatively

    for Failure to State a Claim                    [Dkt.         No.    16]     ("Board Mot.").           The

    FDIC filed a similar Motion [ Dkt. No.                          1 7]       ("FDIC Mot.") ,         as did

    the OCC [Dkt. No. 18]              ("OCC Mot."). On October 2, 2014, Plaintiffs

    filed their Opposition to Motions to Dismiss [Dkt. No. 23]                                         ("Pls.'

    Opp' n") .

            The following day,               Plaintiffs filed a Motion for Discovery

    [Dkt. No. 25]          ("Discovery Mot."). On October 31, 2014, the Board

    filed its Reply in support of its Motion to Dismiss [Dkt. No. 41]

    ("Board      Reply")        and    its    Opposition           to    Plaintiffs'            Motion     for

    Discovery [ Dkt. No. 42]                ("Board Discovery Opp' n") ; the FDIC filed

    its Reply        [Dkt. No.        46]    ("FDIC Reply")             and Opposition               [Dkt. No.

    4 5]    ("FDIC Discovery Opp' n") ; and the OCC filed its Reply                                      [ Dkt.

    No. 44]      ("OCC Reply") and Opposition [Dkt. No. 43]                           ("OCC Discovery

    Opp'n").       Plaintiffs filed their Reply in support of their Motion

    for Discovery [ Dkt. No. 4 9]               ( "Pls.' Discovery Reply") on November

    10, 2014. Plaintiffs also filed a Surreply to Defendants' Replies

    in     Support    of       the    Motions      to       Dismiss        [Dkt.    No.        50]     ("Pls.'

    Surreply")       the same day.           In response,           the FDIC filed a Surreply

    [Dkt. No. 51]          ("FDIC Surreply") on November 14, 2014.

            On   October        23,   2014,     prior        to    the     filing     of       Defendants'

    Replies and Discovery Oppositions,                        Plaintiffs filed a Notice of

    Supplemental Support [Dkt. No. 35]                       ("Pls.' First Supp.") notifying

    the    Court     of    a    letter      from   an       FDIC    official        to     a    depository

                                                        6
institution. On December 12, 2014, after briefing was complete on

the Motions to Dismiss and the Motion for Discovery,                        Plaintiffs

filed a Second Notice of Supplemental Support [Dkt. No. 52]                    ("Pls.'

Second       Supp. ")   to   notify   the    Court      of      a    U.S.    House    of

Representatives         Committee   Report   on   the    FDIC' s      involvement     in

Operation Choke Point.         On December 23,          2014,       the   FDIC filed a

Response to Plaintiffs' Second Supplemental Notice [Dkt. No.                         53]

("FDIC Supp. Resp.").

II.   Second Amended Complaint

      After briefing was complete on the Motions to Dismiss and the

Motion for Jurisdictional Discovery, Plaintiffs filed a Motion for

Leave to File a Second Amended Complaint on April 10, 2015                       [Dkt.

No.   56].    Defendants'    only opposition to the Motion to Amend is

that the proposed Second Amended Complaint is futile because it

does not overcome the alleged deficiencies in the First Amended

Complaint with regard to standing and/or failure to state a claim.

Consequently, Defendants argue that the Motion to Amend should be

denied as futile. See Opp'ns to Motion to Amend. Because this Court

finds, infra, that Plaintiffs have standing and some claims survive

the Motions to Dismiss, and are therefore not futile, Plaintiffs'

Motion to Amend will be granted.             For purposes of deciding the

                                        7
Motions to Dismiss,              the Court will         rely on the Second Amended

Complaint [Dkt. No. 56-1]               ("SAC") in this Memorandum Opinion.

III. Jurisdiction

       A.     Standard of Review Under Fed. R. Civ. P. 12(b) (1)

       As    courts    of limited         jurisdiction,        federal      courts possess

only those powers             specifically granted to them by Congress                       or

directly by the United States Constitution. Kokkonen v. Guardian

Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). The plaintiff bears

the burden of establishing by a preponderance of the evidence that

the Court has subject matter jurisdiction to hear the case.                                 See

Shuler v. United States,             531 F.3d 930,           932   (D.C. Cir.      2008).    In

deciding      whether       to    grant    a    motion       to . dismiss    for    lack     of

jurisdiction under Rule 12 (b) ( 1) ,                the court must "accept all of

the factual allegations in [the] complaint as true." Jerome Stevens

Pharmaceuticals,           Inc. v. Food & Drug Admin.,             402 F.3d 1249, 1253

54    (D.C. Cir.      2005)      (quoting United States v.           Gaubert,       499 U.S.
315, 327 (1991)). The Court may also consider matters outside the

pleadings,     and may rest          its decision on its own resolution of

disputed facts. See Herbert v. Nat'l Acad. of Sci., 974 F.2d 192,

197 (D.C. Cir. 1992).

       B.     Standing

       As a threshold matter,             Defendants argue that Plaintiffs do

not   have    standing.       Article     III       of the Constitution limits              the

jurisdiction          of      federal      courts       to     certain       "Cases"        and

                                                8
"Controversies." See U.S. Const. art. 3,                      §    2. "[N]o principle is

more fundamental to the judiciary's proper role in our system of

government          than    the    constitutional      limitation of            federal-court

jurisdiction to actual cases or controversies." Clapper v. Amnesty

Int'l USA,          133 S. Ct. 1138, 1146 (2013)              (quoting DaimlerChrysler

Corp.       v.   Cuno,     547 U.S. 332,   341,    (2006)).       "One element of the

case-or-controversy requirement is that plaintiffs must establish

that they have standing to sue." Id.                   (internal quotation marks and

citation omitted).

          "[T]he      irreducible          constitutional         minimum       of     standing

contains three elements.               First, the plaintiff must have suffered

an injury in fact .                . which is (a) concrete and particularized,

and       (b)    actual    or     imminent,    not   conjectural           or   hypothetical.

Second, there must be a causal connection between the injury and

the       conduct    complained of                   Third,   it must be             likely,    as

opposed to merely speculative, that the injury will be redressed

by a favorable decision." Lujan v. Defenders of Wildlife, 504 U.S.
555,       560-61     (1992)      (internal     quotation         marks,    citations,         and

footnote omitted) .

          "A plaintiff's burden to demonstrate standing grows heavier

at each stage of the litigation." Osborn v.                          Visa Inc.,         No.    14-

7 004 ,    2 0 15 WL 4 619 8 7 4 ,    at   * 5 ( D. C . Cir . Aug . 4 , 2 0 15 )         ( citing

Lujan, 504 U.S. at 561). "At the pleading stage, general factual

allegations of injury resulting from the defendant's conduct may

                                                9
suffice, for on a motion to dismiss we 'presume that the general

allegations embrace those specific facts which are necessary to

support the claim.'" Lujan, 504 U.S.       at    5 61    (quoting Lujan v.

National Wildlife Federation, 497 U.S. 871, 889 (1990)).

         Our Court of Appeals recently reiterated and emphasized the

requirement         that    courts      must        "accept    as      true    all       material

allegations of the complaint" at the pleadings stage. Osborn, 2015
WL 4619874, at *5 (internal citation omitted). In Osborn, the Court

of Appeals found that the plaintiffs' alleged facts were "specific,

plausible, and susceptible to proof at trial," and therefore they

"pass[ed] muster for standing purposes at the pleadings stage."

Id. at *6.

       "When    a     plaintiff's         asserted        injury        arises       from     the

Government's regulation of a third party that is not before the

court,    it   becomes          'substantially more           difficult'       to    establish

standing." Nat'l Wrestling Coaches Ass'n v.                         Dep't of Educ.,           366
F.3d 930, 938        (D.C. Cir. 2004)          (quoting Lujan, 504 U.S. at 562).

Where standing has been found on the basis of third-party conduct,

"the     record      presented          substantial           evidence        of     a     causal

relationship between the government policy and the third-party

conduct, leaving little doubt as to causation and the likelihood

of redress." Id.           at    941.   Therefore,      while the Court accepts as

true all material allegations made by Plaintiffs, Plaintiffs bear

                                               10
a greater burden of what they must allege in order to show standing

on the basis of third-party conduct.

     In this case,        the elements of causation and redressability

"hinge on the independent choices of the regulated third party,"

namely the banks.        Id.   at 938. While it is Plaintiffs'         burden to

"adduce facts showing that· those choices have been or will be made

in such a manner as to produce causation and permit redressability

of injury," Id.        (quoting Lujan, 504 U.S. at 562)        (emphasis added) ,

at the motion to dismiss stage, Plaintiffs need only allege facts

that are "specific, plausible, and susceptible to proof at trial."

Osborn, 2015 WL 4619874 at *14.

     1.    Injury in Fact

     Defendants do not dispute that Plaintiffs have suffered an

injury    in   fact.     CFSA's   members,       including   Plaintiff   Advance

America, have lost beneficial banking relationships, causing them

on short notice to lose business and expend resources to locate

new banking partners. Pls.' Opp'n at 11. Many payday lenders have

not been able to replace the terminated bank relationships.                   Id.

Plaintiffs     have     also   alleged        that   Defendants'   actions   have

                                         11
deprived them of their ability to compete for banks' resources and

have stigmatized them. Id. at 12-13.

        In    sum,    it   is   clear   that      Plaintiffs    have     alleged    facts

sufficient       to   show an     injury in       fact   at    the   pleadings     stage.

        2.     Causation

         Defendants argue that Plaintiffs do not meet the causation

prong of standing because their injuries are not "fairly traceable"

to any acts by the Defendants,                 and that it was the independent

decisions of the respective banks to terminate their relationships

with Plaintiffs' members.           See Board Mot.         at 10-11; FDIC Mot.         at

12 f   15 •

         To show causation, Plaintiffs must show that the Defendants'

actions were a "substantial factor motivating the decisions of the

third parties that were the direct source of the [P]laintiff[s']

injuries." National Wrestling Coaches, 366 F.3d at 940-41.         Thus

the key issue is the degree of Defendants' alleged involvement or

influence on the banks' decisions to terminate relationships with

payday lenders.

         Plaintiffs allege that the Defendants undertook a "two-stage

regulatory campaign designed to cripple and ultimately eliminate

the payday lending industry." Pls.' Opp'n at 9.                      The first stage

involved Defendants issuing informal regulatory guidance regarding

"reputation risk." Plaintiffs allege that the Defendant agencies

expanded       the     definition       of     "reputation       risk"     beyond     its

                                             12
...

      traditional         understanding       to   include bad publicity due                   to    the

      actions of third parties, even when the actions were unrelated to

      work done on behalf of the bank. SAC                       ~   5, 47-51.

               Plaintiffs cite to several documents issued by the FDIC, as

      well as one by the OCC, as examples of the expansion of "reputation

      risk." See e.g., OCC, Third-Party Relationships: Risk Management

      Guidance,     OCC Bulletin 2013-29                (Oct.        30,   2013);    FDIC,   Financial

      Institution Letter: Guidance for Managing Third-Party Risk,                                   FIL-

      44-2008      (June     6,     2008);     FDIC,         Financial         Institution     Letter:

      Guidance on Payment Processor Relationships, FIL-127-2008 (Nov. 7,

      2008);      FDIC,     Financial        Institution             Letter:     Payment     Processor

      Relationships, FIL-3-2012 (Jan. 31, 2012); FDIC, Managing Risks in

      Third-Party         Payment      Processor             Relationships,           8    SUPERVISORY

      INSIGHTS (Summer 2011) . The Supervisory Insights article included

      a list of merchant categories--including payday loans--"that have

      been associated with high-risk activity." Managing Risks in Third-

      Party Payment Processor Relationships,                          8 SUPERVISORY INSIGHTS at

      7;   Pls.    Second         Supp.,     Ex.   B        at   157       (collectively,      "Agency

      Documents") .

            The second stage,              according to Plaintiffs'                  theory,   is that

      Defendants relied on the expanded definition qf "reputation risk,"

      as . outlined in the           regulatory guidance,                  "as the    fulcrum for a

      campaign of backroom regulatory pressure" to coerce banks                                     into

      terminating relationships with payday lenders.                             Pls.' Opp'n at 9.

                                                       13
Defendants allegedly acted in concert with DOJ in Operation Choke

Point and "used their prudential 'safety and soundness' regulatory

authority" to pressure banks. SAC ! 5; see also SAC !! 56-60.

            Plaintiffs further allege that,             as part of Operation Choke

Point,         Defendants         privately      threatened     banks     with     adverse

regulatory action if they continued doing business with payday

lenders. See id. In support of their theory, Plaintiffs cite to an

internal DOJ memo titled "Operation Choke Point: Eight-Week Status

Report," in which meetings with the FDIC and the possibility of

the FDIC assigning agents to work on DOJ cases were discussed.

Pls.' Opp'n at 25 (citing Memorandum from Michael S. Blume, Dir.,

DOJ Consumer Prot. Branch, to Stuart F. Delery,                       Principal Deputy

Ass't Att'y Gen.,           DOJ Civil Div. at 6 (Apr.            17, 2013),       in Comm.

Report app. at HOGR-3PPP000048.

            Plaintiffs also refer to a February 15, 2013 letter from FDIC

Regional Director M. Anthony Lowe to an unidentified bank regarding

that bank's involvement in payday lending. See Pls.' Supp. Support,

Ex.     A    [Dkt.   No.    35-1].    In   the     letter,    Lowe   states,      "we    have

generally found            that    activities      related to    payday lending are

unacceptable for an insured depository institution." Id.                                at 2.

Lowe also states that members of the Region's Senior Management

will be contacting the bank in the near future "to further discuss

[its]       concerns   relative       to   the     aforementioned       [payday    lender]

relationship." Id. Similarly, Plaintiffs cite to an internal email

                                              14
from Marguerite Sagatelian, Senior Counsel with the FDIC Consumer

Enforcement Unit, stating that FDiC Legal was "looking into avenues

by     which   the     FDIC        can   potentially        prevent       [its]   banks     from

facilitating payday lending." Pls. Second Supp., Ex.Bat 118 [Dkt.

No. 52-2].

         Plaintiffs         bolster      their     allegations       by    noting   that     the

Federal Reserve Board of Governors is the prudential regulator for

three     banks       that    have       already      terminated      relationships         with

Plaintiffs and their members, the OCC is the prudential regulator

for seven banks that terminated relationships with Plaintiffs and

their members, and that the FDIC is the prudential regulator for

four banks that terminated relationships with Plaintiffs and their

members. SAC      ~    84.

         Plaintiffs also point to a DOJ memo indicating that it had

been in contact with "several state attorneys general, FTC, FDIC,

the     Federal Reserve Bank of Atlanta,                    and    [they]     hope to begin

working with          the    OCC    soon,"    in      "an attempt     to     increase      their

knowledge and attention to the roles banks and payment processors

play in facilitating fraud." Memorandum from Michael S.                                   Blume,

Dir., DOJ Consumer Prot. Branch, to Stuart F. Delery, Ass't Att'y

Gen.,    DOJ Civil Division at 14                  (Sept.   9,    2013),    in Comm.      Report

app.     at    HOGR-3PPP000339.                  Finally,        Plaintiffs       claim     that

Defendants undertook the actions they did with the express purpose

                                                 15
of     pressuring      banks    to     terminate             relationships      with     payday

lenders.

        In sum,     Plaintiffs have alleged sufficient facts,                          that, if

proven     true,    could      show        that        the   Defendants'      conduct    was   a

"substantial factor motivating the decisions of third parties that

were    the   direct    source        of     [ P] laintiff [ s' ]        injuries."    National

Wrestling Coaches, 366 F.3d at 940-41. Because the "facts alleged

by the Plaintiffs are specific, plausible, and susceptible to proof

at trial, they pass muster for standing purposes at the pleadings

stage." Osborn, 2015 WL 4619874 at *6.

        3. Redressability

       Next, Defendants argue that Plaintiffs lack standing because

their injuries are not redressable by the Court.                              Redressability

requires that       Plaintiffs demonstrate "a substantial likelihood 3

that the requested relief will remedy the alleged injury in fact."

Teton Historic Aviation Found.                    v.     U.S.   Dep' t    of Def.,    7 8 5 F.3d
719, 724 (D.C. Cir. 2015)             (quoting Vermont Agency of Natural Res.

3  Plaintiffs argue that they need only allege that the relief
requested would result in a "significant increase in the
likelihood" that their banking relationships will be reinstated."
Pls.' Opp'n at 19-20 {citing Utah v. Evans, 536 U.S. 452, 464
 (2002)). Both phrasings are used in our Circuit and are essentially
the same in practice. See, e.g., Town of Barnstable, Mass. v. Fed.
Aviation. Admin., 659 F.3d 28, 31 (D.C. Cir. 2011)          (stating
"significant    increase  in   the  likelihood"   and   "substantial
probability" are synonymous); Spectrum Five LLC v. Fed. Commc'ns
Comm'n, 758 F.3d 254, 261 (D.C. Cir. 2014) (utilizing "significant
increase in the likelihood" standard) .

                                                  16
v. U.S. ex rel. Stevens, 529 U.S. 765, 771 (2000)). A "substantial

likelihood" requires "more than a remote possibility .                          . that

[Plaintiffs']        situation might                    improve were the court to

afford relief," Warth v. Seldin, 422 U.S. 490, 491 (1975), but is

not so demanding as to require Plaintiffs to "show to a certainty

that a favorable decision will redress [their] injury." Teton, 785
F.3d at 726 (quoting Nat'l Wildlife Fed'n v. Hodel, 839 F.2d 694,

705 (D.C. Cir. 1988)).

       Plaintiffs' prayer for relief includes:                (1) declaring various

Agency Documents to be unlawful,                 ( 2)   declaring that      Defendants

significantly changed the definition of reputation risk without

notice      and   comment     rulemaking;       (3)     declaring    that   Defendants

deprived Plaintiffs of liberty without due process of law;                         ( 4)

enjoining Defendants,          "as well as those acting in concert with

them," from implementing the aforementioned Agency Documents, from

relying on the revised definition of "reputation risk," and from

applying informal pressure to banks to encourage them to terminate

relationships with payday lenders;                (5)    enjoining Defendants, "as

well   as    those   acting    in     concert with them,"           from harming the

reputations       of Plaintiffs and from seeking to deprive                    them of

access to financial services;             and     (6)    other such relief as the

Court deems just and proper. SAC            ~   205.

       Defendants focus their redressability arguments primarily on

the    invalidation      of     the    Agency         Documents,    offering    little

                                           17
discussion about             Plaintiffs'          other requested relief.          They also

argue     that    12        U.S.C.     §    1818(i) (1)       prevents    this   Court    from

providing any injunctive relief that interferes with "the issuance

or enforcement of any notice or order." Board Mot. at 15-16; FDIC

Mot.    at 43-44; OCC Mot.                 at 18-19.     The nature of any injunctive

relief     the   Court        is     able    to provide       is   extremely relevant       to

standing, as "Plaintiffs cannot establish standing by requesting

relief that the Court lacks the authority to grant." Long Term

Care Pharmacy All. v. Leavitt,                     530 F.     Supp. 2d 173, 185       (D.D.C.

2008) .

        Therefore, the Court will address the parties' redressability

arguments regarding the invalidation of the Agency Documents and

injunctive       relief            separately,          and    will      then    assess    the

"substantial       likelihood"               of    redressability.         Teton     Historic

Aviation Found., 785 F.3d at 724.

                       i.      Invalidation of Agency Documents

        Defendants argue that, even if the Court were to invalidate

the Agency Documents that allegedly redefine reputation risk and

enjoin Defendants'             actions,       it does not necessarily follow that

the banks will re-establish relationships with the Plaintiffs. See

FDIC Mot. at 16-20; OCC Mot. at 13-14; Board Mot. at 14.

        Defendants explain that the Agency Documents do not require

banks     to   sever relationships with any third parties,                          but   only

provide guidance on risk management. For that reason,                              Defendants

                                                   18
argue that the documents could not have been the impetus for the

termination of the bank relationships,                   and invalidation of them

will not necessarily be the catalyst for reinstatement of the bank

relationships. See FDIC Mot. at 17; OCC Mot. at 14-15. The Board

argues that this is particularly true for it, because Plaintiffs

are not even seeking to invalidate any Board documents. See Board

Mot. at 14.

      Defendants        argue    further    that    invalidation       of    the     Agency

Documents      would not        provide    prospective       relief   to     Plaintiffs.

Banks would still be required to abide by safety and soundness

standards, and independently determine whether they can adequately

manage risks. See OCC Mot. at 14-15; Board Mot. at 14.

      Defendants also point out that the Agency Documents do permit

banks to have relationships with payday lenders.                         Moreover,      the

FDIC notes that it recently promulgated two Financial Institution

Letters      ("FILs")    explicitly       stating   that     banks    "that      properly

manage"      relationships        with    customers        engaged    in    higher-risk

activities, and the associated risks, "are neither prohibited nor

discouraged from providing" services to those customers. FDIC Mot.

at   18-19     (quoting     FIL-43-2013) .       Thus,      the   FDIC      argues     that

invalidating      the     Agency      Documents       is     unlikely       to     provide

prospective relief,         as there would be no change in the                       FDIC' s

official position, which already permits relationships with payday

lenders. Id. at 19.

                                            19
         Although         invalidation         of    the     Agency      Documents      would      not

    necessarily lead to restoration of banking relationships,                                 it may

    certainly affect            Defendants'         ability to pressure banks                 in the

    future.    Plaintiffs         have   argued          that   Defendants        relied      on   the

definition of "reputation risk" contained in the Agency Documents

as the "fulcrum" of their campaign pressuring banks to terminate

relationships             with    payday       lenders.         Pls.'    Opp'n     at    9.    Under

Plaintiffs'          theory,      it is    likely that             the   invalidation of the

Agency        Documents         could    deprive         Defendants       of    this    "fulcrum."

Plaintiffs          are    not     required         to    "show     to   a     certainty      that   a

favorable decision will redress                          [their]    injury." Teton Historic

Aviation Found., 785 F.3d at 726 (internal citation omitted).

                          ii.    Section 1818(i) and Injunctive Relief

         Defendants argue that Section 1818 of the Federal Deposit

Insurance Act             ("FDI Act")      divests the Court of jurisdiction to

grant Plaintiffs most of the injunctive relief they seek. See Board

Mot.     at   15;    OCC Mot.       at 18-20;            FDIC Mot.       at    44-45;   12 U.S.C.

§    1818 (i) (1). Section 1818 (i) (1) states that "no court shall have

jurisdiction to affect by injunction or                            otherwis~"     any ongoing or

future enforcement action by Defendants,                             or to "review, modify,

suspend,       terminate,          or    set        aside"      such     actions.       12    U.S.C.

§    1818 (i) (1).

        As an initial matter,               Plaintiffs correctly point out that

there is no enforcement action at issue here, nor are they asking

                                                    20
the Court to enjoin future enforcement actions. See Pls.' Opp'n at

25.

      Defendants argue that any injunction the Court might enter is

likely to interfere with or effectively enjoin future enforcement

actions,   and is therefore precluded by Section 1818 (i) (1).                           See

Board Mot. at 15-17;, OCC Mot. at 20; FDIC Reply at 22-23. The FDIC

further argues that the limitation imposed by Section 1818 ( i) ( 1)

extends    ~o    supervisory       actions        as   well,     such    as   examination

findings   and notices of undercapi tali zed status.                      See FDIC Mot.

at 44-45; FDIC Reply at 22-23.

      While     it   is   true     that    Section      1818 (i) (1)     precludes      this

Court's jurisdiction to issue an injunction that interferes with

an enforcement action or an order under Sections 1818, 18310, or

1831p-1, that does not preclude the Court's ability to grant any

injunctive relief against Defendants.                     The exact contours of any

injunctive      relief     this    Court   might       grant     would   depend    on   the

specific facts that are proven. Mere speculation that an injunction

"might" interfere with "any notice or order" does not necessarily

mean that the Court has no authority to grant Plaintiffs' claims

for injunctive relief that do not cover Sections 1818,                            18130,or

1831p-1.

      Moreover,      all     the     cases        cited     by    Defendants      involve

challenges to specific enforcement actions or orders. See, e.g.,

Board of Governors of Fed. Reserve Sys. v. MCorp Fin., Inc., ·502

                                             21
U.S. 32, 39 ( 1991)          (court lacked jurisdiction to enforce automatic

stay in bankruptcy against agency enforcement proceeding); Ridder

v.   Office of Thrift Supervision,                   146 F.3d 1035, 1039           (D.C. Cir.

1998)       (no jurisdiction under 1818 (i) (1)                to enjoin provision in

consent order); Groos Nat'l Bank v. Comptroller of the Currency,

573 F.2d 889, 895 (5th Cir. 1978)                    (court cannot issue declaratory

judgment that would prevent agency from pursuing enforcement).

        That is simply not the case here.                     Section 1818(i)       does not

necessarily prevent the Court from granting Plaintiffs' requests

for injunctive relief . 4

                      iii. Likelihood of Redressability

        Even    if    some      injunctive          relief    might      be   available     to

Plaintiffs,         the Court must also. determine if injunctive relief

and/or the invalidation of the Agency Documents will result in a

"substantial         likelihood"        that        Plaintiffs'         injuries    will   be

redressed.

        Defendants      point    out    that        other    reasons     unrelated to      the

challenged Agency Documents and actions by Defendants may affect

banks' individual decisions on whether to reinstate relationships

with       payday    lenders.     See   Board        Mot.     at   15    (citing    National

       4
       The FDIC also argues that Plaintiffs' requested injunctions
are overbroad and improper. FDIC Mot. at 45. While the FDIC may
turn.out to be correct, that alone does not, at this time, defeat
jurisdiction to provide injunctive relief.

                                               22
Wrestling Coaches,         3 66 F. 3d at        93 9) ;   FDIC Mot.     at   14.      Such

factors include safety and soundness standards, bank capacity and

systems to effectively manage                   risk,       DOJ' s   continued activities

under Operation Choke Point, etc. See OCC Mot. at 14; Board Mot.

at 14. Due to these factors,               Defendants contend, it is not clear

that a decision by this Court would change the outcome of banks'

decisions.

     Plaintiffs          believe        that,        because      some     banks     regretted

terminating payday lenders, "they presumably would reverse those

decisions if the coercive regulatory influence was removed." Pls.'

Opp'n at 20. Plaintiffs support this assumption with letters from

banks indicating that the banks were "very sorry" to terminate the

relationship,       were     "frustrated              and       disappointed"      with      the

situation, and, in the case of one bank, expressing the "hope [that

they could] find a way to work together again soon." Id. (citations

omitted).    These letters do suggest that some banks would likely

consider re-establishing relationships.

     Although they believe banks would resume relationships with

them should the Court order relief,                       Plaintiffs argue that it is

not necessary to show that even a single bank would restore service

to payday lenders in order to establish redressability. Pls.' Opp'n

at 19.   Instead,    Plaintiffs argue that,                     to the extent Defendants

deprived    them    of    "the     ability           to   compete    for    banks'       limited

compliance and risk management resources on an equal footing," and

                                                23
therefore Plaintiffs need only demonstrate that they are "able and

ready" to compete for banking services should the Court provide

relief.   Pls.'       Opp' n at 19          (citing Northeastern Fla.              Chapter of

Associated Gen. Contractors of Am. v. City of Jacksonville, Fla.,

508 U.S. 656, 666 (1993).

       City     of    Jacksonville,           and        the    redressability          standard

Plaintiffs cite it for, do not support Plaintiffs' argument.                                   City

of    Jacksonville        involved      a     challenge         to   a   minority       business

program that required 10% of the amount spent on city contracts be

set aside for "Minority Business Enterprises." Id.                                at   659.       The

Supreme Court         found    that,        in order to         establish standing,               the

plaintiff       did   not     need     to    show        that   it     would    have    won       the

contracts, but rather only needed to demonstrate that the policy

prevented it from competing for the contracts on an equal basis.

Id. at 666. Unlike City of Jacksonville, this case does not involve

any    sort     of    set-aside        or    quota        program.       Nor    was     City       of

Jacksonville a third-party standing case, which is "substantially

more difficult." Lujan v. Defenders of Wildlife, 504 U.S. 555, 562

(1992).       Moreover,       Plaintiffs          do     not    even     allege       that     bank

relationships         were    terminated           because       Plaintiffs       were       at     a

competitive disadvantage due to· Defendants' actions.

      Plaintiffs       argue     that       the        injunctive      relief   they     request

would "restrain Defendants from inflicting additional injury by

continuing to pressure banks to terminate [Plaintiffs'] accounts,"

                                                  24
thereby      providing           meaningful          prospective        relief         and

redressability. Pls.' Opp'n at 19 (emphasis omitted).

      However,      Defendants          provide       little    in     the      way     of

counterargument     as     to    why   injunctive      relief would not          redress

Plaintiffs' injuries. The FDIC and OCC do not address the issue at

all, and instead rely wholly on their belief that injunctive relief

is not available because of Section 1818(i) (1). See FDIC Reply at

3-4; OCC Reply at 9-13. The Board responds that, even if the Court

enjoined Defendants from exerting regulatory pressure, it does not

necessarily· follow that banks would restore any relationships and

"banks    still   could    terminate         these    relationships"     with      payday

lenders for a multitude of lawful business reasons. See Board Reply

at 10-11 (emphasis in original) .

      While the Board is correct that banks could still terminate

payday    lenders   even    if    Plaintiffs         received   injunctive      relief,

Plaintiffs are not required to show that banks could not,                           under

any   circumstances,       terminate         relationships      in    order   to      show

redressability.     If Plaintiffs are able to prove that injunctive

relief would result in a substantial likelihood that banks will

restore    relationships         or    not    terminate    relationships         in   the

future, they have sufficiently established.

      Assuming for now the truth of Plaintiffs'                      allegations that

Defendants expanded the definition of reputation risk and relied

on that expanded definition to pressure banks into terminating

                                             25
relationships with payday lenders,                      it is reasonable to conclude

that     a     Court      order     invalidating        the      guidance    documents      and

enjoining Defendants would redress Plaintiffs'                            injuries.     In the

absence of such pressure, some banks may well choose to reestablish

relationships             with    Plaintiffs.         Finally,     the    absence      of   such

pressure           is   also     likely     to    prevent        additional     banks       from

terminating relationships with Plaintiffs in the future.

        In sum, Plaintiffs have alleged facts sufficient to show that

there is a "substantial likelihood" that a                           favorable ruling by

this Court would redress their injuries.

        C.         Mootness

        The FDIC argues that the two guidance documents it has issued

render Plaintiffs'               case moot,      FDIC Mot.       at 22,     because,    to the

extent the FDIC Agency Documents may have previously led banks to

terminate relationships with payday lenders, the two more recent

FILs    they have          issued expressly clarified that                   termination of

relationships is not required.

        The two new guidance documents, as noted previously, are FILs

issued in September 2013 and July 2014. The FILs state that banks,

with appropriate controls in place, may continue to do business

with "merchant customers engaged in higher risk activities," and

those        who     properly      manage     such      relationships         "are     neither

prohibited          nor    discouraged"       from      doing     business     with     payday

lenders       (among others).        FIL-43-2013 at 2;            FIL-41-2014 at 2. The

                                                 26
July        2014    FIL    also        removed     the     list     of     high-risk          merchant

categories, due to "the misperception that the listed examples of

merchant categories were prohibited or discouraged." FIL-41-2014

at     2.     Therefore,      the      FDIC   concludes,          even    if the        FDIC Agency

Documents did force banks to terminate their relationships with

payday lenders, the two FILS negate any such action now.

        The doctrine of mootness is premised upon the notion that

"[a]        federal       court     is    constitutionally               forbidden       to     render

advisory opinions or 'to decide questions that cannot affect the

rights of litigants in the case before them.' "Better Gov't Assoc.

v.     Dep't of State,         780 F.2d 86,             90-91     (D.C. Cir.         1986)    (quoting

North Carolina v. Rice, 404 U.S. 244, 246 (1971)). Plaintiffs state

that under the two-pronged test established by the Supreme Court,

Defendants          bear    the     burden    of        showing    that     " ( 1)     there    is    no

reasonable expectation that the alleged violation will recur and

( 2)    interim       relief      or     events    have     completely           and    irrevocably

eradicated the effects of the alleged violation." Pls.' Opp'n. at

22     (quoting Reeve Aleutian Airways,                     Inc.     v.    United States,            889
F.2d 1139,   1142-43       (D.C.    Cir.     1989));        see    also       County of Los

Angeles v. Davis, 440 U.S. 625, 631 (1979). This burden "is a heavy

one." Reeve Aleutian Airways, 889 F.2d at 1143).

        The FDIC has not met this heavy burden. The invalidation of

the Agency Documents is only one facet of the relief Plaintiffs'

seek -        Plaintiffs'      other alleged harms and requested relief are

                                                   27
not mooted by the FDIC's clarification of the Agency Documents.

Furthermore,     in   addition      to     the    allegation    that      the    Agency

Documents    forced   banks    to    terminate       relationships        with    them,

Plaintiffs     also   allege   that       the     Agency   Documents      improperly

redefine "reputation risk" and violate the APA. SAC ! ! 137, 169,

195.   The September 2013        and July 2014         FILs    do   not   change the

definition of or even mention            ~reputation   risk." See. FIL-43-2013;

FIL-41-2014; see also Pls.' Opp'n at 23. Nor do the FILs remedy

the alleged APA violations of the previous FILs.

       Therefore, while the September 2013 and July 2014 FILs may

have addressed a portion of Plaintiffs' allegations, they have not

resolved the entirety of Plaintiffs' claims. Therefore Plaintiffs'

claims are not moot.

        · D. Plaintiffs' Motion for Jurisdictional Discovery

       In response to Defendants' contention that the Court has no

jurisdiction,    Plaintiffs have filed a Motion for Jurisdictional

Discovery in order to further support their Complaint. Because the

Court has found that it has jurisdiction, Plaintiffs' Motion for

Jurisdictional discovery is moot and is therefore denied.

         E. Prudential Standing

    Defendant FDIC argues that, even if Plaintiffs have Article III

standing, Plaintiffs fail to meet prudential standing requirements

because they are not within the zone of interests protected by the

relevant statutes.     FDIC Mot.         at 20.   The principle of prudential

                                          28
standing "denies a right of review if the plaintiff's interests

are so marginally related to or inconsistent with the purposes

implicit in the statute that it cannot reasonably be assumed that

Congress intended to permit the suit." Clarke v. Sec. Indus. Ass'n,

479 U.S. 388, 399 (1987).

       The FDIC states that the statutes giving it the authority to

promulgate guidelines, as well as the FDIC Agency Documents, are

focused on promoting the safety and soundness of banks, and that

those interests are not implicated by Plaintiffs'                          claims.       FDIC

Mot. at 21.

       Plaintiffs       failed     to   respond       to     this    argument     in    their

Opposition,       and the FDIC argues that Plaintiffs have therefore

conceded this point.             See Pls.' Opp'n; FDIC Reply at 5; see also

Clifton Power Corp. v. Fed. Energy Reg. Comm'n, 88 F.3d 1258, 1267

(D.C.    Cir.    1996)    (taking as conceded a seemingly sound argument

that was not opposed); Rosenblatt v. Fenty, 734 F. Supp. 2d 21, 22

(D.D.C.    2010)        ("an    argument   in    a    dispositive       motion    that    the

opponent        fails    to     address    in    an     opposition       may     be    deemed

conceded") .

       It was only after the FDIC stated that Plaintiffs had conceded

this     argument        that    Plaintiffs          filed    a     Surreply     addressing

prudential standing. Plaintiffs counter that "inherent in all of

Plaintiffs' arguments that are based upon the [FDI] Act .                                  is

                                            29
the proposition that Plaintiffs' injuries fall within the zone of

interest protected by the [FDI] Act." Pls.' Surreply at 2-3.

      How~ver,     the Supreme Court's recent decision in Lexmark Int'l,

Inc. v. Static Control Components,                Inc., 134 S. Ct. 1377         (2014),

"makes plain the zone of interests test no longer falls under the

prudential         standing    umbrella."        Crossroads   Grassroots        Policy

Strategies v. Fed. Election Comm'n, 788 F.3d 312, 319                     (D.C. Cir.

2015)        (citing Lexmark, 134 S. Ct. at 1387 n. 4). Nor is the zone

of interests test a jurisdictional requirement.                  Id.    Instead, the

Supreme        Court   ruled   that   the    zone   of   interests      test    is    now

considered a merits issue,            in which the "court asks whether the

plaintiff 'has a cause of action under the statute.'" Id.                      (quoting

Lexmark, · 134 S. Ct. at 1387) .

      Given the clear holdings from the Supreme Court and our Court

of Appeals' clear rulings that the zone of interests test is not

related       to   jurisdiction or     standing,     the   FDIC' s     argument      that

Plaintiffs lack prudential standing necessarily must be denied.

IV.     Failure to State a Claim

        A.      Standard of Review Under Fed. R. Civ. P. 12(b) (6)

        To survive a motion to dismiss under Rule 12(b) (6) for failure

to state a claim upon which relief can be granted,                       a plaintiff

need only plead "enough facts to state a claim to relief that is

plausible on its face" and to "nudge[ ] [his or her] claims across

the line from conceivable to plausible." Bell Atlantic Corp. v.

                                            30
Twombly, 550 U.S. 544, 570 (2007). "[O]nce a claim has been stated

adequately,     it     may be     supported           by    showing        any   set    of    facts

consistent with the allegations in the complaint." Id. at 563.

       Under the Twombly standard,                   a "court deciding a motion to

dismiss must not make any judgment about the probability of the

plaintiffs' success .                     [,] must assume all the allegations in

the complaint are true            (even if doubtful in fact)                              [, and]

must give the plaintiff the benefit of all reasonable inferences

derived from the facts alleged." Aktieselskabet AF 21.                                  November

2001 v. Fame Jeans Inc., 525 F.3d 8, 17 (D.C. Cir. 2008)                                (internal

quotation     marks     'and    citations           omitted).       The     court      does    not,

however, accept as true "legal conclusions or inferences that are

unsupported by the facts alleged."                   Ralls Corp. v. Comm. on Foreign

Inv.    in   U.S.,    758 F.3d 296,     315        (D.C.    Cir.     2014)      (citation

omitted).      Furthermore,           a     complaint          which        "tenders          'naked

assertion[s]'        devoid of        'further factual enhancement'" will not

suffice.     Ashcroft v.        Iqbal,      556 U.S. 662,    678     (2009)      (quoting

Twombly, 550 U.S. at 55 7)             (alteration in Iqbal) .

       B.    APA Claims

       Plaintiffs allege that Defendants violated the APA in a number

of ways.     The APA requires that the Court "hold unlawful and set

aside agency action,           findings,       and conclusions" that are,                     inter

alia: "arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with law";                  "contrary to constitutional right,

                                               31
    power,       privilege,         or        immunity";     "in         excess     of     statutory

    jurisdiction, authority,                  or limitations"; or "without observance

    of procedure required by law." 5 U.S.C.                        §   706(2).

           Plaintiffs allege that Defendants:                          ( 1)   promulgated binding

    rules without providing notice and comment,                               as required by law,

    see SAC, Counts 1, 5, and 9; (2) exceeded their authority conferred

    by 12 U.S.C.       §   1831p-1 to set standards for safety and soundness,

    see   SAC,       Counts    2,        6,    and   10;    ( 3)       acted     arbitrarily       and

    capriciously, see SAC, Counts 3, 7, and 11; and (4) deprived them

    of protected liberty interests without due process of law,                                     see

    SAC, Counts 4, 8, and 12.

                1.         Final Agency Action Requirement

          Before the Court can evaluate the merits of Plaintiffs' APA

claims,         it must first determine whether Defendants'                              actions are

considered           final    agency          actions.     The     APA        authorizes    judicial

review only of "[a] gency action made reviewable by statute and

final agency action for which there is no other adequate remedy in

a court." 5 U.S.C.             §    704.       Plaintiffs have cited no provision of

the       FDI    Act   authorizing            judicial     review        beyond    that    which    is

provided for in the APA. Therefore, the alleged agency actions by

Defendants must be final agency actions in orde.r to be judicially

reviewable. 5 Nat'l Ass'n of Home Builders v. Norton,                                    415 F.3d 8,

5An alternate way of viewing the final agency act·ion question is
whether the action constitutes "a de facto rule or binding norm

                                                     32
13 (D.C. Cir. 2005); see also Lujan v. Nat'l Wildlife Fed'n, 497
U.S. 871, 882 (1990)         ("When . . . review is sought not pursuant to

specific authorization in the substantive statute, but only under

the general review provisions of the APA, the 'agency action'                                in

question must be 'final agency action.'")                (citing 5 U.S.C.            §    704).

        "The   Supreme   Court       has    established      a     two-part      test        to

determine when an agency action is reviewable as final." Nat' 1

Ass'n of Home Builders, 415 F.3d at 13. First, the action under

review      "must     mark     the         'consummation'         of     the     agency's

decisionmaking process--it must not be of a merely tentative or

interlocutory nature." Id.            (quoting Bennett v.              Spear,    520 U.S.
154,    177-78    (1997)).   Second,       the action must "be one by which

'rights or obligations have been determined,' or from which 'legal

consequences will flow.'" Id.              (quoting Bennett, 520 U.S. at 178).

Final    agency     action may be          comprised    of   "a    series       of       agency

pronouncements rather than a single edict." Ciba-Geigy Corp.                                 v.

Envtl. Prot. Agency, 801 F.2d 430, 435 n. 7 (D.C. Cir. 1986).

        Our Court of Appeals has also given guidance for evaluating

whether    legal    consequences       flow      from   an   action.      One        line    of

analysis "considers the effects of an agency's action, inquiring

that could not properly be promulgated absent" the requirements of
the APA. Ctr. for Auto Safety v. Nat' 1 Highway Traffic Safety
Admin., 452 F.3d 798, 806 (D.C. Cir. 2006). By demonstrating the
latter, a party implicitly proves the former, "because the agency's
adoption of a binding norm obviously would reflect final agency
action." Id.

                                            33
whether the agency has '(l) impose[d] any rights and obligations,

or (2) genuinely [left] the agency and its decisionmakers free to

exercise discretion.'" Id.            (quoting CropLife Am. v. Envtl. Prot.

Agency, 329 F.3d 876, 883 (D.C. Cir. 2003)). "The language used by

an agency is an important consideration in such determinations."

Id. "The second line of analysis looks to the agency's expressed

intentions. This entails a consideration of three factors:                            (1) the

agency's own characterization of the action; (2) whether the action

was   published in      the       Federal    Register    or        the   Code of     Federal

Regulations;     and   (3)    whether the action has binding effects on

private   parties      or     on    the     agency."    Id.        at    806-07     (internal

quotation marks and citation omitted).

          2.      Defendants' Actions Constitute Neither Final Agency
                  Actions Nor Binding Norms

      Plaintiffs point to two actions by each of the Defendants

that they consider final agency actions:                      1)    the promulgation of

the Agency Documents; and 2) coercive back-room communications and

the   creation   of    a     de    facto     rule   against        providing      financial

services to all payday lenders.                See SAC   ~~        116-22,   127,    148-54,

159, 180-184, 189. The FDIC and OCC argue that the Agency Documents

do not constitute final agency action, see FDIC Mot. at 23-24; OCC

Mot. at 21-29, while the Board notes that Plaintiffs do not even

allege that any guidance documents issued by the Board violate the

APA, see Board Mot. at 18. In addition, Defendants argue that the

                                             34
communications Plaintiffs cite in support of their argument of a

de facto rule .do not constitute final agency action. Board Mot. at

19; FDIC Mot. at 36-37.

        As noted above, under Bennett, Defendants' actions cannot be

viewed as "final agency action" under             §    704 of the APA unless they

"mark the consummation of the agency's decisionmaking process" and

either     determine     "rights   or    obligations"        or    result    in   "leg.al

consequences." Bennett, 520 U.S.        at 178    (citations and internal

quotation marks omitted).

        After setting forth the two-step Bennett analysis, Plaintiffs

inexplicably fail to discuss the first Bennett step and make no

argument as to how the Agency Documents or the alleged de facto

rules     "mark   the    consummation      of    [Defendants']        decisionmaking

processes." See Pls.' Opp'n at 27-28. The closest Plaintiffs come

to   addressing    the     first   Bennett      step    is   a    passing     reference

stating,    without further explanation,              that the Agency Documents

"purport     to   reflect    the   agencies'      expertise,         experience,      and

reasoned reflection." Pls.' Qpp'n at 29. Plaintiffs continue that

"[n]othing in the guidelines suggests that they are                         'tentative,

open to further         consideration,     or conditional on future agency

action."' Id.      (quoting City of Dania Beach,                 Fla. v.    F.A.A.,   485
F.3d 1181, 1188 (D.C. Cir. 2007)).

        Plaintiffs'     statement sufficiently alleges that the Agency

Documents reflect the consummation of the agencies decision-making

                                          35
    process,   rather than a tentative or interlocutory step in that

process.       Given   that    the   documents   were   published   and   widely

distributed by the FDIC and OCC, it is reasonable to view them as

the      consummation    of    the   agencies'    decision-making   processes.

Therefore, the Court finds that the first Bennett prong has been

met with regard to the Agency Documents.

         Plaintiffs have alleged that Defendants created a de facto

rule--in other words, Defendants' alleged "coercive communications

with     banks,"   taken      together,   have   effectively   created    a   rule

against providing financial services to payday lenders.

         It is not readily apparent how the amorphous de facto rule

against payday lenders alleged by Plaintiffs is the consummation

of the Defendants' decision-making processes. 6 In the absence of

any explanation by Plaintiffs, the Court concludes that the alleged

de facto rule fails to meet the first step of the Bennett test.

Having failed the first prong of the Bennett test, any alleged de

facto rule created by Defendants is not a final agency action and

therefore not subject to review under the APA. 7

6Plaintiffs' allegation of a de facto rule is not to be confused
with a legal conclusion that Defendants created a de facto rule
sufficient for purposes of § 704.

7 In the SAC, Plaintiffs also allege that Defendants coerced Early
Warning Services ( "EWS") , a credit reporting company, "directly
and indirectly through its five parent banks" to set an effective
Annual Percentage Rate cap of 36% and cease providing its services
to payday lenders. SAC ~ 112. EWS is not regulated by Defendants.
Plaintiffs fail to allege in the SAC any facts that could support

                                          36
      Turning to the second prong of the Bennett test, Plaintiffs

make several arguments regarding the legal consequences of the

Agency Documents.      Plaintiffs characterize them as "filled with

obligatory language and threats of enforcement actions."                     Pls.'

Opp'n at 31. Such characterizations are clearly unsupported by the

facts on which Plaintiffs rely.               Plaintiffs excerpt phrases from

the   Agency   Documents     such   as   "it     is   essential   that,"   "it   is

imperative that," and "the FDIC expects," as examples of obligatory

language. Id. Read in context, it is clear that the language does

not create new legal obligations.              Instead,   the language is used

with regard to banks' overall responsibility to manage risks and

third-party risks 8    -   obligations that existed pri9r to the Agency

Documents.     In   addition,   the      documents      consistently   use    non-

mandatory language such as "should," rather than "shall" or "must."

See e.g.,    FIL-127-2008; OCC Bulletin 2013-29;             see also Holistic

Candlers & Consumers Ass'n v. F.D.A., 664 F.3d 940, 944 (D.C. Cir.

an argument that Defendants' alleged coercion was the consummation
of the Defendants' decision-making processes.

8  For example: "The FDIC expects a financial ins ti tut ion to
adequately oversee all transactions and activities that it
processes and to appropriately manage . and mitigate operational
risks, Bank Secrecy Act (BSA) compliance, fraud risks, and consumer
protection risks,·among others." FIL-3-2012 at 2 (emphasis added);
"Financial institutions that do not adequately manage these
relationships may be viewed as facilitating fraudulent or unlawful
activity by a payment processor or merchant client. Therefore, it
is imperative that financial institutions recognize and understand
the businesses with which they are involved." FIL-127-2008 at 1
 (emphasis added) .

                                         37
2012)      (use of "should" and "may" make plain that "there has been

no   order compelling      the     appellants    to    do   anything")     (internal

citation omitted).

        Indeed,    Plaintiffs actually acknowledge the advisory nature

of   the    Agency    Documents,    stating     that   "[a] lthough      the    banks'

failure to follow the agencies' informal guidance may not directly

trigger civil liability, these guidance documents set a standard

for risk management that may also be used indirectly in other civil

enforcement actions," Pls.' Opp'n at 33,                and alleging that some

"letters encourage banks to cut off relations .                   . if the risks

are too great." Id.       at 32     (emphasis added) . Al though the Agency

Documents provide guidance on the FDIC and OCC's views regarding

risk management, they do not impose any obligations or prohibitions

on banks.         Guidance that "does not tell regulated parties what

they must do or may not do in order to avoid liability" is merely

a general statement of policy.               National Mining Ass'n.,           2014 WL
3377245 *6 (July 11, 2014).

        Furthermore, the Agency Documents expressly state that they

are not obligatory and are meant only to serve as guidance.                        See

e.g., FIL-44-2008 at 2 ("[t]he guidelines should not be considered

a set of mandatory procedures"); OCC Bulletin 2013-29 at 1 ("[t]his

bulletin provides guidance to national banks and federal savings

associations") .      While this alone does not totally insulate the

documents      from     having      legal      consequences,      the      agency's

                                        38
characterization of the documents is one of the relevant factors

for    consideration.        Ctr.    for   Auto        Safety, 452 F.3d at        806-07.

Guidance documents must establish a "new substantive rule" before

they    can   be     characterized         as     final      action    under     the     APA.

Broadgate, Inc. v. USCIS, 730 F. Supp. 2d 240, 245 (D.D.C. 2010).

       The Court need not limit its analysis to the four corners of

the Agency Documents.           Our Circuit has "looked to post-guidance

events to determine whether the agency has applied the guidance as

if it were binding on regulated parties." Nat'l Min.                             Ass'n v.

McCarthy, 758 F.3d 243,. 253 (D.C. Cir. 2014).

       Plaintiffs allege that Defendants engaged in a campaign of

backroom pressure against banks and payday lenders, relying on the

definition of "reputation risk" outlined in the Agency Documents.

See Pls.' Opp'n at 29. Specifically, Plaintiffs argue that the use

of    "reputation     risk"     in    many      termination       letters      from    banks

indicates     that    the    redefinition         of    "reputation     risk"    has    been

actively enforced. Id. However, these letters are from banks, not

Defendants,     and     do    not     indicate         any    legal    consequences        or

enforcement stemming from the Agency Documents or Defendants.

       In a similar vein, Plaintiffs argue that DOJ's attachment of

an FDIC guidance document to subpoenas is indicative of the legal

effect of the guidance document.                  Pls.'      Opp' n at 33.      Plaintiffs

cite to Barrick Goldstrike Mines Inc. for the proposition that an

informal action stating an agency's position, along with the threat

                                             39
of enforcement action,              may constitute final          agency action.             See

Pls.'     Opp' n at    2 9-30      (citing Barrick Golds trike Mines                  Inc.    v.

Browner, 215 F.3d 45, 48 (D.C. Cir. 2000).

        While an enforcement action may be sufficient to show legal

consequences, it is not per se indicative of final agency action.

The enforcement action must still be evaluated within the Bennett

rubric of "rights or obligations" or "legal consequences."

        In Barrick, an enforcement letter from the guidance-issuing

agency,     relying     on      the      guidance    document     as     the    basis        for

enforcement,        caused         the    guidance     document        to      have     legal

consequences.       In this case however,            none of the Defendants have

issued any enforcement letters and Barrick is not relevant.

        DOJ's use of an FDIC guidance document does not necessarily

reflect the FDIC's views, nor do any legal consequences flow from

the document itself; any legal consequences flow from the actions

of DOJ. Plaintiffs point to no case law to support the contention

that    DOJ' s   use   of    the    FDIC' s    document constitutes            enforcement

action--and therefore final agency action--by the FDIC.

        Plaintiffs     also     allege        that   the    guidelines      provide          the

Defendant agencies with a                justification for requiring a bank to

submit a     safety and soundness plan,                which is        "an initial step

toward exercising their enforcement powers." Pls.'                          Opp'n at 32.

Obviously,       there is an important distinction between an initial

step    toward    an   enforcement         action,    and    an   actual       enforcement

                                               40
action.     See Reliable Automatic Sprinkler Co.                  v.    Consumer Prod.

Safety Comm'n,      324 F.3d 726,        731-32        (D.C.   Cir.    2003)   (no final

agency action where agency issued preliminary determination of

violation of law, but was required by statute to bring a formal

action before      it    could make      a        legally binding determination) .

Plaintiffs are not alleging that the Agency Documents commit the

FDIG or OCC to a particular course of action.                         It remains within

the FDIC and OCC's discretion to determine whether an enforcement

action is warranted.

       For all the foregoing reasons, the Court concludes that the

Agency Documents are not final agency actions for purposes of                      §   704

review because they do not determine any rights or obligations.

Consequently,      they are not subject to judicial review under the

APA and all of Plaintiffs claims under the APA fail to state a

claim. Therefore, Defendants' Motions to Dismiss shall be granted

with regard to Counts 1, 2, 3, 5, 6, 7, 9, 10, and 11, as well as

the portions of Counts 4,           8, and 12 that plead violations of the

APA.

       C.    Violation of Fifth Amendment Due Process

       In Counts    4,   8,   and   12   of the        Second Amended Complaint,

Plaintiffs allege that Defendants stigmatized them, deprived them

of their bank accounts, and threatened their ability to engage in

their chosen line of business, all without notice and opportunity

to be heard, in violation of their procedural due process rights

                                             41
·.
     under the Fifth Amendment to the United States Constitution. See

     SAC    ~~   141-47, 173-79, 198-204; U.S. Const. amend. V.

             The       Fifth        Amendment's    due     process        clause          protects    the

     indi victual citizen from the arbitrary exercise of power by the

     government. Mathews v. Eldridge,                     424 U.S. 319, 332               (1976). For a

     plaintiff to establish a procedural due process claim,                                     it must

     show that          (1)    it has a protected interest,                    (2)    the government

     deprived it of this interest,                   and       (3)    the deprivation occurred

     without proper procedural protections.                           See Indus.          Safety Equip.

     Ass'n, Inc. v. Envtl. Prot. Agency, 837 F.2d 1115, 1122 (D.C. Cir.

     1988).

                  1.          Applicability of Due Process Protections

            Defendants argue that the Supreme Court has held that due

     process protections are not applicable to legislative activities

     of an administrative agency that are generalized in nature and

     affect a large number of parties. See Board Mot. at 28-29 (citing

     Natural Res. Def. Council,                 Inc. v. Envtl. Prot. Agency,                   859 F.2d
156,   194    (D.C. Cir. 1988); Bi-Metallic Inv. Co. v.                              State Bd. Of

     Equalization Colorado, 239 U.S. 441 (1915)); OCC Mt. at 37-38. In

     Bi-Metallic,             the     Supreme     Court        held     that     no       hearing     was

     constitutionally               required    prior     to    a     decision       by    Colorado    to

     increase the valuation of taxable property. Bi-Metallic Inv. Co.,
239 U.S. at 445-46.

                                                     42
       However,      the Supreme Court has recognized a distinction in

administrative        law    "between      proceedings          for   the     purpose    of

promulgating policy-type rules or standards, on the one hand, and

proceedings designed to adjudicate disputed facts in particular

cases on the other." United States v.                    Florida E. Coast Ry. Co.,

410 U.S. 224,   245    (1973). Adjudicative proceedings require more

individualized        process      than    rule-making          decisions.       See    id.

at 244-45.

       Plaintiffs' allegations fall somewhere in between the Court's

two    opposing poles.           Plaintiffs      first    allege      that    Defendants'

promulgated guidelines,           which are akin to "policy-type rules or

standards."      Plaintiffs       also    allege    that    Defendants        engaged    in

coercive      backroom      communications       aimed     at    payday      lenders    and

targeted specific payday lenders.                See Pls.'       Opp'n at 43 n.         17.

Plaintiffs allege that Defendants took these actions for the direct

purpose of putting them out of business, which is more akin to an

informal adjudication.

       The FDIC also argues that the Due Process Clause does not

apply to the indirect adverse effects of government action.                             See

FDIC Mot. at 43        (citing O'Bannon v. Town Court Nursing Ctr., 447
U.S. 773,    789    (1980)).    While    the     O'Bannon court           distinguished

"between government acti?n that directly affects a citizen's legal

rights, or imposes a direct restraint on his liberty, and action

that is directed against a third party and affects the citizen

                                           43
only indirectly or              incidentally,"            this    case    fits     into   neither

category.       O'Bannon, 447 U.S.        at 788.      Though Defendants'           alleged

actions were directed at the banks,                         Plaintiffs argue that they

were the intended targets - that Defendants undertook the actions

with     the     express        purpose         of      affecting        Plaintiffs.       Taking

Plaintiffs' allegations as true, the impact was neither "indirect"

nor "incidental," and therefore O'Bannon is inapplicable.

        Defendants'        actions,        as      alleged       by    Plaintiffs,        are   not

legislative in nature and are more analogous to an adjudication of

payday    lenders        right     to    do     business.        Nor   are   the    effects      of

Defendants' alleged actions indirect or incidental. Therefore, the

Court concludes that Plaintiffs have sufficiently stated a claim

for which due process protections apply.

           2.        Interests Protected by Due Process

        Turning     to    the merits          of     Plaintiffs'       alleged due        process

claim,    "[t] he    first       inquiry in every due process                    challenge is

whether the plaintiff has been deprived of a protected interest in

'property' or 'liberty.'" American Mfrs. Mut. Ins. Co. v. Sullivan,

526 U.S. 40, 59 (1999)              (U.S. Const. amend. 14). In order to have

a life, liberty, or property interest, a party must have more than

an abstract need or desire -                    the party must have "a legitimate

claim of entitlement to it." Board of Regents of State Colleges v.

Roth,    4 08 U.S. 564,    5 77   ( 197 2) .      Interests afforded due process

protection are not created by the Constitution, but are defined by

                                                   44
existing "rules or understandings that secure certain benefits and

that support claims of entitlement to these benefits." Id.

       Plaintiffs allege that the stigma resulting from Defendants'

actions     have affected two of their protected interests:                             1)    an

interest     in   their bank accounts;              and 2)       an    interest    in   their

ability to engage in their chosen line of business. Pls.' Opp'n at

42-43.

       While a company may have a "liberty interest in avoiding the

damage to its reputation and business" caused by stigma,                                Reeve

Aleutian Airways,         Inc. v. United States, 982 F.2d 594, 598                       (D.C.

Cir.     1993),   the     Supreme    Court        has   held    that    stigma     alone      is

insufficient to implicate due process interests,                          see Gen.      Elec.

Co. v. Jackson, 610 F.3d 110, 121 (D.C. Cir. 2010)                        (citing Paul v.

Davis,     424 U.S. 693,    7.08   (1976).        In     addition    to     stigma      or

reputational harm,         the plaintiff must be able to show "that                          ( 1)

the government has deprived them of some benefit to which they

have a legal right, e.g., the right to be considered for government

contracts in common with all other persons; or (2) the government-

imposed stigma is so severe that it broadly precludes plaintiffs

from pursuing a chosen trade or business." Id. at 121                              (internal

quotation marks and citations omitted).

       Plaintiffs        have    alleged     that       the    stigma     promulgated         by

Defendants has resulted in lost banking relationships,                             and that

the continued loss of banking relationships                     ~ay    preclude them from

                                             45
pursuing their chosen line of business. Pls. Opp'n at 42-43. This

is   sufficient to constitute a      "tangible change in status" and

implicate a protected liberty interest.         O'Donnell v.   Barry,    148
F.3d 1126, 1141 (D.C. Cir. 1998).

      Plaintiffs also argue that the stigma deprived them of their

right to a bank account.      Plaintiffs cite to National Council of

Resistance   of   Iran   v.   Department   of   State   ("NCRI")   for   the

proposition that our Court of Appeals has previously held that a

colorable allegation of a property interest in a bank account is

sufficient to support a due process claim. See Pls.' Opp'n at 42-

43 (citing NCRI, 251 F.3d 192, 204 (D.C. Cir. 2001)).

      It is important to distinguish between the right to have a

bank account, and the right to the contents of one's bank account.

In NCRI, it was not only the bank account alone, but also the funds

that it contained. NCRI, 251 F.3d at 204. The issue here is not

that Plaintiffs have been denied access to their funds, but that

they have been denied an account at all.

      In Wisconsin v. ·Constantineau,      the Supreme Court held that

"[w]here a person's good name, reputation, honor, or integrity is

at stake because of what the government is doing to him,            notice

and an opportunity to be heard are essential." See 400 U.S. 433,

437 (1971). The Supreme Court elaborated its Constantineau holding

in Paul v. Davis, stating that when an individual is "deprived .

     of a right previously held under state law" as a result of

                                    46
stigmatization, due process is required.          Paul v. Davis, 424 U.S.
693,   708    (1976)     The deprivation at issue in Constantineau was

"the right to purchase or obtain liquor in common with the rest of

the citizenry." Id.

       Plaintiffs have alleged a         similar deprivation here -         "the

previously held right to .          . hold bank accounts. NCRI, 251 F.3d

at 204.      "Many people            would consider    [this]    right[]   more

important than the right to purchase liquor." Id.               The loss of a

bank account as a result of stigma is sufficient to implicate a

right to due process.

       In    sum,   Plaintiffs   have   sufficiently   alleged    that     their

liberty interests are implicated by Defendants'            alleged actions

and that the alleged stigma has deprived them of their rights to

bank accounts and their chosen line of business, so as to state a

claim for violation of constitutional due process.

V.     Conclusion

       For all of the        foregoing reasons,   Defendants'    Motions     for

Lack of Jurisdiction, or Alternatively for Failure to State a Claim

are granted in part and denied in part.            Plaintiffs'     Motion for

Jurisdictional         Discovery is denied,   and Plaintiffs'     Motion for

                                        47
Leave to File a Second Amended Complaint is granted. An Order shall

accompany this Memorandum Opinion.

September 25, 2015

Copies via ECF to all counsel of record

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