But the heart of the agency’s argument came in the assertion that, as a Federal agency, it merits a high degree of deference in judicial opinions and judgments and that the credit unions cannot meet that standard. “CCU’s challenge to NCUA’s promulgation and implementation of its regulations and to NCUA’s July 11, 2005 determination must necessarily fall under the Administrative Procedure Act,” the agency’s lawyers argued, “the only applicable statute that allows a court to review agency’s actions such as those at issue here.” NCUA argues that the Court has to review its rules and action under the APA because the Courts have generally given agencies a lot of leeway under that legislation. Essentially, unless an agency’s actions or interpretations can be shown to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” a Court must yield to them and must not merely substitute its own opinion about the regulatory issue at hand, arguing: “In reviewing an agency’s final rule, the reviewing court must accord considerable deference to the agency’s expertise in administering its own statutory scheme. If Congress has spoken to the `precise question at issue,’ the Court must give effect to its `unambiguously expressed intent.’ If, however, the statute is silent or ambiguous as to the specific issue, or Congress has expressly assigned a matter to the agency’s discretion, the Court should defer to the agency’s interpretation, so long as that interpretation is reasonable.” And NCUA argued that its regulations and actions are reasonable because Congress gave it the authority to oversee credit union to mutual bank charter conversions and did not spell out precisely how to do that. The agency also argued that its regulations governing the charter change process are not any more restrictive than other Federal regulatory agencies which govern similar charter changes and, in fact, are consistent with them. The agency’s brief outlined the history of the agency’s regulation of credit union-to-bank charter changes back to 1998 and sought to show that each new regulation grew organically from the agency’s increasing experience with these types of charter changes and concerns that credit union members were not being given enough information to completely understand the significant ownership and other changes that a change of charter brings. NCUA also observed that Congress had given it the authority in these regulations to step into the situation for which procedures are not set into statute. “While the FCUA instructs that NCUA’s rules should be consistent with rules promulgated by other financial regulators and no more or less restrictive than that applicable to charter conversions by other financial institutions, Congress has not otherwise defined what these rules should be, but has delegated such authority to NCUA to promulgate appropriate rules,” the agency’s lawyers argued. “Given that Congress has expressly assigned this matter to NCUA’s discretion, the Court should defer to NCUA’s reasonable interpretation of the appropriate methods and procedures for the conversion process, as instructed by the Supreme Court.” NCUA also made the case that its regulations are not more restrictive than Federal financial regulators by pointing out that each agency regulates different institutions and faces different circumstances. For example, the agency argued, the Office of Thrift Supervision has some regulations governing the conversion of a mutual savings bank to stock banks that are more restrictive than anything the NCUA requires when credit unions seek to convert to mutual banks, such as a meeting with the agency before the bank’s board of directors even votes to approve an attempt to change charters and must provide a plan of conversion before the board even votes on it. Also, NCUA doesn’t mandate that credit unions’ notifications to convert include specific plans and information, something that the Office of Thrift Supervision mandates savings banks provide. The bottom line, the agency argued, is that Federal law only requires that its regulations be consistent with, not identical to, those of other Federal agencies. “In its assertion, CCU ignores the significant differences between credit unions and the conversion of a credit union to a mutual savings bank versus the types of institutions that are regulated by OTS and OCC and the potential conversions of those institutions” the agency’s lawyers argued. “These differences should certainly be considered when analyzing whether certain rules that govern different types of conversions are consistent with each other.” NCUA defended its regulations and regulatory authority so strongly because they provide the foundation for its invalidating Community’s and OmniAmerican’s ballot votes based on their not fulfilling the agency’s disclosure regulations. In requiring the credit unions to put the mandated disclosure statements in a prominent and conspicuous place, as it had indicated through the rulemaking process, the agency was merely seeking to use the authority Congress had given it to try to fulfill its responsibility of making sure credit union members are properly informed of what is at stake in a charter change, the agency stated. “NCUA’s determination that CCU failed to adhere to the regulation by the manner in which it displayed the rebuttal and required disclosures is based on the intent and purpose of the regulation, i.e., the disclosures help members – the owners of the credit union – to be fully informed voters so they may make meaningful choices about the future of their credit union,” the agency said, adding: “The mailings contain a great deal of information; if the disclosures are presented in a manner that dissuades the members from reading them, the whole purpose behind the disclosures is lost and the members may only consider information that is more pro-conversion. It certainly was not arbitrary or capricious for NCUA – the agency charged with administering the voting process for such conversions – to require that the disclosures be displayed in a manner that would encourage, rather than discourage, the members to read them.” Now that all sides have filed their introductory briefs, the next event in the case will take place August 17, 2005 at which the Court will hear oral arguments in favor and against Community’s receiving a preliminary injunction against the NCUA. -

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