United States Court of Appeals, Sixth Circuit

41 F.
3d 1050
63 USLW 2373
COMMUNITY FIRST BANK; Independent Bank; The Ionia

County
National Bank of Ionia; Union Bank, Plaintiffs-Appellants,
v.
The NATIONAL CREDIT UNION ADMINISTRATION;
Portland Federal
Credit Union, Defendants-Appellees.
No. 93-2244.
United States Court of Appeals,

Sixth Circuit.
Argued Oct. 13, 1994.
Decided Dec. 5, 1994.
As Amended May 8, 1995.
William K. Holmes and Robert J. Jonker (argued and briefed), Warner,

Norcross & Judd, Grand Rapids, MI, for plaintiffs-appellants.
Thomas J. Gezon, Asst. U.S. Atty., Office of the U.S. Atty., Grand Rapids,
MI, Douglas N. Letter, Dept. of Justice, Appellate Staff, Civ. Div.; and
Jonathan R. Siegel (argued and briefed), U.S. Dept. of Justice, Civ. Div.,
Washington, DC, for defendant-appellee.
Thomas J. Gezon, Asst. U.S. Atty., Office of the U.S. Atty., Grand Rapids,
MI, Steven Widerman, Office of Gen. Counsel, Nat. Credit Union, and
Kenneth L. Doroshow, U.S. Dept. of Justice, Civ. Div., Washington, DC,
for defendant.
Michael F. Crotty (briefed), American Bankers Ass'n; and Teresa Burke
(briefed), and Paul J. Lambert, Bingham, Dana & Gould, Washington,
DC, for amici curiae.
Before: KEITH, WELLFORD, and DAUGHTREY, Circuit Judges.
WELLFORD, Circuit Judge.
Four Michigan banks, competitors of Portland Federal Credit Union ("Portland

Federal") challenge the National Credit Union Administration's ("NCUA")
decision to allow Portland Federal to expand its service area to all of Ionia
County, Michigan. The district court granted summary judgment in favor of
NCUA and Portland Federal, 832 F.Supp. 1118. The plaintiff banks filed a
timely appeal with this court challenging the action of NCUA in granting the
expansion and the district court's approval thereof.
On appeal, defendant the NCUA challenges the standing of the banks to contest
its expansion. Assuming the banks do have standing, the second issue becomes
whether the district court improperly granted summary judgment in favor of
Portland Federal and NCUA.
I. PROCEDURAL BACKGROUND
3
Portland Federal is a tax-exempt, community-based credit union, located in

Ionia County, Michigan. Although Portland has a population of only 4,000
people, the surrounding rural areas around Portland have a population of about
70,000 people. It is these rural areas that Portland Federal is attempting to
reach.1 One of the prime targets of expansion is the City of Ionia, which is
about the same size as Portland but is the county seat. Much of the litigation
involves whether Ionia and Portland are one "community."
From humble beginnings in 1947 as an occupational credit union, Portland

Federal has expanded to meet the needs of this relatively small rural area
around Portland. In 1953, it converted to a community-based organization,
serving persons within a six-mile radius of the Portland Post Office. In 1981, it
amended its charter again to include certain adjacent portions of Clinton County
and Eaton County and certain additional portions of Ionia County, all
immediately surrounding the City of Portland. It sought, in August of 1992, to
amend its charter to include the remainder of Ionia County, and about onefourth of neighboring Clinton County.
Four nearby competitor private banks contest this requested expansion,2

arguing that the region does not constitute a "community" for purposes of
establishing a required "common bond" within the meaning of the Federal
Credit Union Act, 12 U.S.C. Sec. 1759. Plaintiffs stress that "[t]he proposed
field of membership covered over 70,000 persons and numerous distinct
communities within Ionia County, including two cities comparable to or larger
than Portland, Ionia and Belding."3 The proposed area of expanded
membership also touched "three separate United States Congressional Districts,

three separate state Senatorial districts, six public school districts, and two
separate area codes" according to plaintiffs. The competitor banks also
presented a marketing study (which had been conducted by the Ionia County
Board of Commissioners to study the quality of the county's governmental
services) for the proposition that little commercial intercourse existed between
Portland and Ionia.
6
Portland Federal challenges the banks' reliance on this marketing study, arguing
that the competitor banks selectively picked data from the largest cities, even
though the study relied upon by the banks was a county-wide study and the
disclaimer on the report stated that the study was "based on a countywide
sample and the survey design never intended to produce information reliable at
the level of individual cities or townships." Portland Federal submitted their
own marketing study, which demonstrated, among other things,
7 the city of Ionia was the county seat of Ionia county, to which many people
that
regularly traveled on business; survey results showing that people regularly
commute in the area; shared characteristics and concerns of persons in the area; and
the likeness of the proposed area to a regulatory example ... of a permissible area
contained in the agency's [regulations].
8
Portland Federal also presented demographic evidence to demonstrate that the

two towns share common characteristics. They pointed to survey responses of
its customers as to the advisability of expanding the credit union to demonstrate
that Ionia County residents consider the entire county one community. The
majority of responses reflect that many members of the credit union have
commercial transactions in both towns.
If plaintiffs have standing, we have jurisdiction over this appeal from a final
order of the district court pursuant to 28 U.S.C. Sec. 1291. The district court
properly exercised jurisdiction pursuant to 28 U.S.C. Sec. 1331 as this action
arose under the Federal Credit Union Act, 12 U.S.C. Sec. 1751, et seq.
II. STANDING OF BANKS TO CHALLENGE THE AGENCY'S DECISION

10
A. Standing requirements cannot be waived by individual parties.
11
12
Portland Federal did not prevail on the standing issue raised in the district court,
but failed to cross-appeal the district court's judgment, approving expansion.
Plaintiffs argue that Portland Federal has waived its standing challenge by
failing to cross-appeal. Plaintiffs seek to rely on the Supreme Court's
distinction in several cases between constitutional and prudential standing

requirements. The Supreme Court has recognized that constitutional standing
requirements cannot be waived, but there may be a waiver of prudential
standing requirements. Plaintiffs suggest that individual parties may waive
prudential standing requirements if they fail to raise standing as an issue on
cross-appeal.
13
We disagree with plaintiffs on this contention. Standing is not an affirmative

defense that must be raised at risk of forfeiture. Instead, it is a qualifying hurdle
that plaintiffs must satisfy even if raised sua sponte by the court. We find no
authority for the plaintiffs' argument that prudential standing requirements may
be waived by the parties. Recognizing a distinction between prudential and
constitutional standing requirements in this context might give careless parties
power to override congressional intent.
B. Competitor banks are suitable challengers to a credit union expansion.

14
15
The real issue is whether the plaintiffs satisfy the prudential standing
requirements. To meet these standing requirements under Sec. 702 of the
Administrative Procedure Act (APA), 5 U.S.C. Sec. 702, plaintiffs must
establish 1) that they have suffered a legal wrong because of the challenged
agency action, or, are adversely effected within the meaning of a relevant
statute, and 2) that the injury they complain of is within the zone of interests of
the statutory provision which forms the legal basis of their complaint. Air
Courier Conference of America v. American Postal Workers Union, 498 U.S.
517, 522-25, 111 S.Ct. 913, 917-18, 112 L.Ed.2d 1125 (1991). Have plaintiffs
in this case met the second part of the test--the "zone of interest" test?
16
The "zone of interest" test excludes those plaintiffs whose "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. Securities Indus. Ass'n, 479 U.S. 388, 399-400, 107 S.Ct. 750, 757,
93 L.Ed.2d 757 (1987). "The test is not meant to be especially demanding; in
particular, there need be no indication of congressional purpose to benefit the
would-be plaintiff." Id. (citations and footnote omitted).
17
The two courts that have addressed whether banks have standing to challenge
charter expansions of credit unions under the Federal Credit Union Act have
reached contrary results. See First National Bank & Trust Co. v. National
Credit Union Admin., 988 F.2d 1272 (D.C.Cir.), cert. denied, --- U.S. ----, 114
S.Ct. 288, 126 L.Ed.2d 238 (1993) (holding banks do have standing); Branch
Bank & Trust v. National Credit Union Admin., 786 F.2d 621 (4th Cir.1986),
cert. denied, 479 U.S. 1063, 107 S.Ct. 948, 93 L.Ed.2d 997 (1987) (holding
banks do not have standing). We enter the debate now and grant standing to the
competitor banks.
18
It should be noted that in both First National and Branch Bank, the courts
concluded that banks do not meet the "zone of interest test" because the
legislative history demonstrates that Congress intended to promote the growth
of credit unions, not insulate banks from competition. See First National, 988
F.2d at 1275; Branch Bank, 786 F.2d at 625-27. During the interim between
these cases, however, the Supreme Court reemphasized that even if a plaintiff
were not the intended beneficiary of the legislation, it would nevertheless have
standing to sue if the interest it asserted had a plausible relationship to the
policies underlying the legislation. Clarke, 479 U.S. at 403, 107 S.Ct. at 759.
The later First National opinion, relying on Clarke, held that banks were
suitable challengers to credit union expansion because they can protect
congressional interests in requiring credit union members to share a common
bond. Congress, in enacting this legislation, felt that requiring some connection
between borrowers and depositors would enhance credit union stability because
borrowers would be less likely to default.
19
Although the competitor banks are more concerned with limiting competition
than they are with promoting credit union stability, allowing banks to challenge
the common bond provision furthers Congress' objectives in some respects.
Refusing to allow competitor banks to challenge credit union expansion might
preclude any challenge to an excessively risky credit union expansion. It is
doubtful that potential users or members of the credit union would have
sufficient insight at the onset to realize that the expansion in question was risky
(and if they did have this insight, they would simply refuse to invest their
money with the credit union instead of litigating the expansion issue). Other
credit unions might also have no interest in objecting to an excessive expansion,
unless it conflicted with their own limited jurisdiction. Nor do consumer
protection groups appear to be adequate substitutes for banks, who have
sufficient adverse interests to challenge a questionable credit union expansion.
As was the court in First National, we are of the opinion that the competitor
banks are suitable challengers to the NCUA's action and do have standing.
III. WAS NCUA'S DECISION ARBITRARY AND CAPRICIOUS?

20
21
We review the district court's decision de novo, applying the appropriate

standard of review to the agency's decision. Schuck v. Frank, 27 F.3d 194, 197
(6th Cir.1994). The appropriate standard of review for the agency action in this
case is the abuse of discretion standard. 5 U.S.C. Sec. 706(2)(A) (providing that
agency decisions may be set aside only if they are "arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law"). See also Goldin
v. FDIC, 985 F.2d 261, 263 (6th Cir.1993) ("While a court reviewing agency
determinations should not be a rubber stamp, the arbitrary and capricious
standard is deferential toward agency decisions.").
IV. DEFINITION OF "COMMUNITY"
22
23
The Federal Credit Union Act limits membership in credit unions to "groups
having a common bond of occupation or association, or to groups within a welldefined neighborhood, community, or rural district." 12 U.S.C. Sec. 1759. The
statute does not define a common bond, but gives the NCUA authority to
regulate credit union membership. The NCUA issued regulations in 1989 that
govern the chartering of credit unions:
24
Given
the diversity of community characteristics throughout the country and
NCUA's goal of making credit union service available to all eligible groups who
wish to have it, NCUA has established the following common bond requirements:
a. The geographical area's boundaries must be clearly defined; and
25
26The charter applicant must establish that the area is recognized by those who live
b.
and work there as a distinct "neighborhood, community, or rural district."
27
54 Fed.Reg. 31,165 (1989) (incorporated by reference into 12 C.F.R. Sec.

701.1).
28
The amici briefs submitted on behalf of several banks challenge the NCUA's
definition of community. They urge this court to adopt a narrower interpretation
of the term, such as a geographical place with a singular name or "a small city
or town, such as the city of Ionia."
29
This court is not free simply to impose its own construction of the statute.
American Academy of Ophthalmology, Inc. v. Sullivan, 998 F.2d 377 (6th
Cir.1993). "[A] court may not substitute its own construction of a statutory
provision for a reasonable interpretation made by the administrator of an
agency." Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837, 844, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984). The inquiry "is
not how appellants would prefer to construe this statute, but whether the
agency's construction is permissible." American Academy, 998 F.2d at 383.
30
The NCUA's regulations defining "community" (a clearly defined geographical
area whose residents identify it as a distinct area) constitute a permissible

definition of community. It is not inconsistent with the Webster's definition of
community: "the people with common interests living in a particular area;
broadly: the area itself." Webster's New Collegiate Dictionary, p. 227 (1981).
31
The amici banks also argue that the agency's definition is arbitrary because it
has changed several times over the last sixty years. We do not agree. The
Supreme Court, in Rust v. Sullivan, 500 U.S. 173, 111 S.Ct. 1759, 114 L.Ed.2d
233 (1991), stated:
32 revised interpretation deserves deference because "[a]n initial agency

[A]
interpretation is not instantly carved in stone" and "the agency, to engage in
informed rulemaking, must consider varying interpretations and the wisdom of its
policy on a continuing basis." An agency is not required to " 'establish rules of
conduct to last forever,' " but rather "must be given ample latitude to 'adapt [its]
rules and policies to the demands of changing circumstances.' "
33
Id. at 186-87, 111 S.Ct. at 1769 (citations omitted). It is not surprising that the
agency may have changed its policies several times since 1934, since the
national economy, and the composition of communities, has changed
substantially over the years.
V. WAS THE DECISION TO ALLOW EXPANSION AN ABUSE OF

34
DISCRETION?
35
36
Substantial evidence exists in the administrative record to support the NCUA's

decision to allow Portland Federal to expand. The district court's opinion
considers this evidence.
37
Ionia is the county seat of the county and is the economic center of the county.
The marketing analysis observed that "many people, including Portland
Federal's members, regularly travel there to conduct business." A survey
conducted by Portland Federal of its members strongly recommended
expansion, citing the convenience of an Ionia branch. Portland Federal
presented demographic evidence that demonstrated many residents of both
towns share similar characteristics. Another survey conducted by the Ionia
County Chamber of Commerce reflected that a majority in both towns rated
Ionia County's rural environment as important. Portland and Ionia are, of
course, both located in a rural county. Geographical proximity alone may have
been enough to establish a "community."
38
That the proposed area of expansion touches six school districts, has a variety
of political jurisdictions, has several religious districts, is located in different
telephone area codes, and is served by separate local newspapers is not of
determinative significance.
VI. CONCLUSION
39
We believe there was a proper weighing of the interests of the parties in this
case. The definition utilized on what comprises a common community is not
unreasonable. There is a common bond involved. We add, however, that this
decision is confined to the facts of this case; it is not intended to establish a
precedent that community federal credit unions, or persons in a similar status,
are free to expand to an entire county or to an adjacent county. Each case must
be viewed on its own merits.
40
We, accordingly, AFFIRM the agency's decision and the decision of the district
court.
After making concessions to the areas covered by other community credit

unions, the geographical area of expansion has a population of about 44,000
Several credit unions also contested Portland's expansion, arguing that the
expansion would create overlaps with their fields of membership. Portland
Federal made concessions to these credit unions to avoid overlapping
jurisdictions; these changes are reflected in the approved geographical service
area in which NCUA permitted Portland Federal to serve
It should be noted that plaintiffs focus on Portland Federal's original request,

which sought to expand into a geographical area that contained 70,000 people.
The agency only authorized expansion into a geographical area that contains
44,000 people, eliminating Belding from the approved area. The county had a
1990 population of about 50,000

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41 F.

COMMUNITY FIRST BANK; Independent Bank; The Ionia

United States Court of Appeals,

William K. Holmes and Robert J. Jonker (argued and briefed), Warner,

Four Michigan banks, competitors of Portland Federal Credit Union ("Portland

Portland Federal is a tax-exempt, community-based credit union, located in

From humble beginnings in 1947 as an occupational credit union, Portland

Four nearby competitor private banks contest this requested expansion,2

membership also touched "three separate United States Congressional Districts,

Portland Federal also presented demographic evidence to demonstrate that the

II. STANDING OF BANKS TO CHALLENGE THE AGENCY'S DECISION

distinction in several cases between constitutional and prudential standing

We disagree with plaintiffs on this contention. Standing is not an affirmative

B. Competitor banks are suitable challengers to a credit union expansion.

III. WAS NCUA'S DECISION ARBITRARY AND CAPRICIOUS?

We review the district court's decision de novo, applying the appropriate

54 Fed.Reg. 31,165 (1989) (incorporated by reference into 12 C.F.R. Sec.

The NCUA's regulations defining "community" (a clearly defined geographical

area whose residents identify it as a distinct area) constitute a permissible

32 revised interpretation deserves deference because "[a]n initial agency

V. WAS THE DECISION TO ALLOW EXPANSION AN ABUSE OF

Substantial evidence exists in the administrative record to support the NCUA's

After making concessions to the areas covered by other community credit

It should be noted that plaintiffs focus on Portland Federal's original request,

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