‘Free-Floating Malaise’ |No Basis for Standing

(CN) - A federal judge dismissed the New York Bankers Association attempt to block a New York City law requiring an evaluation of community investments made by banks holding the city's deposits.

The NYBA sued the New York City Council in October 2013, claiming the body enacted an unconstitutional law extending its power to designate which banks can handle the city's $6 billion in deposits.

At the heart of the complaint, the bankers association objected to the city's intent to collect and publish information on data such as bank foreclosures and mortgage modifications.

Such an action, said the association, which represents more than 140 commercial banks and federal associations in New York State, was tantamount to the city making itself a bank regulator, illegally, "with the power to threaten deposit banks with public criticism and debarment if those banks do not conform to the CIAB's [Community Investment Advisory Board] subjective 'benchmarks, best practices and recommendations.'"

The bankers association challenged City Local Law Number 38, establishing the Community Investment Advisory Board, which "shall seek to collect" information from banks the city designates as "deposit banks" - "those banks with which the city and its agencies may deposit their funds - and to publish on the City Department of Finance's website evaluations of the extent to which such banks meet 'credit, financial and banking services needs throughout the City."

The bankers claimed the law, which the City Council passed on June 28, 2012 over the veto of then-Mayor Michael R. Bloomberg, impermissibly empowers the CIAB to become a local bank regulator, with the power to regulate the activities of any federal or state bank that does, or wishes to do, deposit business with the city."

The law violates the "clear prohibition" in federal law of local regulation of federally chartered depository institutions, which bars local laws that empower local authorities to collect information from, and supervise the banking activities, of such institutions, the bankers said.

But U.S. District Judge Katherine Polk Failla held the association failed to demonstrate that it had standing to pursue its claims at the time the action was filed.

As Judge Failla recounts in her opinion, in the association argued it had standing by virtue of the fact that "LL 38 'was enacted for no other purpose than, as the four corners of it make clear, to regulate the activities of deposit banks, [and] no one else.'"

"While Plaintiff conceded that LL 38 had yet to be implemented, it contended nonetheless that the mere existence of LL 38 'creates harm and injury ... because we don't know what the legal landscape will be six months from now or eight months from now or nine months from now,'" Failla continues. "When asked, then, whether Plaintiff had standing to pursue this action when LL 38 was passed back in 2012, Plaintiff responded that, 'the injury was clearer as you got closer to the end of ... 2013, when there was clearly going to be a new mayor and the new mayor was going to enforce this law in a way that the prior mayor had not.' However, Plaintiff pointed to no factual allegations in the Complaint in support of this assertion."

In the end, "All that Plaintiff had in October 2013 was a free-floating malaise that, one day in the future, a new mayoral administration might implement LL 38; this cannot suffice to constitute standing," Failla wrote.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit