Comm. for Monetary Reform v. Bd. of Governors, 766
F.2d 538 (D.C.Cir. 1985)
COMMITTEE FOR MONETARY
REFORM WITH VARIOUS OTHER Plaintiffs,
Appellants,
v.
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM, et al.
Appellees,
COUNSEL: Lawrence Velvel, for Appellants. John E.
McDermott was on the brief, for Appellants.
Sandra M. Schraibman, Attorney, Department of
Justice, with whom Richard K. Willard, Acting Assistant Attorney General and
Anthony J. Steinmeyer, Attorney, Department of Justice were on the brief, for
Appellees.
Grasty Crews, II was on the brief for the Honorable
John Melcher, Member, United States Senate, Amicus Curiae, urging affirmance.
JUDGES: Robinson, Chief Judge, and Edwards and
Ginsburg, Circuit Judges. Opinion for the Court filed by Circuit Judge Edwards.
OPINION:
EDWARDS, Circuit Judge:
The question presented in this case is whether
private businesses and individuals who allegedly have suffered financial damage
as a result of the money supply policies of the Federal Reserve System
("System") have standing to raise constitutional challenges to the
exercise of power by the System and to the composition of one of its elements,
the Federal Open Market Committee ("FOMC" or "Committee").
The District Court held that the appellants lacked standing, and accordingly
dismissed the complaint. n1 We affirm.
I. BACKGROUND
The Federal Reserve System, established in 1913 as
the nation's central bank, is composed of both public and private elements. n2
In addition to the FOMC, the System includes the Board of Governors, the twelve
regional Federal Reserve Banks, the Federal Advisory Council, and the
approximately 5,500 privately owned commercial banks that are members of the
System. Among the principal functions of the Federal Reserve System is the
conduct of monetary policy, the aim of which is to promote national economic
goals through influence on the availability and cost of bank reserves, bank
credit, and money. The three primary means through which the System implements
monetary policy are open market operations, regulation of member bank borrowing
from the Federal Reserve Banks, and establishment of member bank reserve
requirements.
The most important of these methods, open market
trading -- i.e., the purchase and sale of Goverment securities in the domestic
market -- is exclusively the function of the FOMC. n3 The Committee is composed
of twelve members: the seven members of the Board of Governors of the Federal
Reserve System, who are appointed by the President with the advice and consent
of the Senate, n4 and five representatives of the Federal Reserve Banks, who
are elected annually by the boards of directors of the Banks from among the
Banks' presidents and first vice presidents. n5 The Federal Reserve Banks are
private corporations whose stock is owned by the member commercial banks within
their districts. n6 The board of directors of each Reserve Bank consists of six
members elected by the member commercial banks and three members appointed by
the Board of Governors of the Federal Reserve System. n7 The presidents and
five vice presidents of the Reserve Banks are selected by the respective boards
of directors but are subject to approval, suspension and removal by the Board
of Governors. n8 In short, the FOMC consists of seven members who hold their
offices by virtue of presidential appointments confirmed by the Senate, and
five members who are elected by Reserve Bank boards of directors, and who hold
their offices subject to the approval of the Board of Governors.
This is the third occasion in recent years on which
we have been presented with a challenge to the composition of the FOMC on the
ground that the participation of the five Reserve Bank members violates the
Appointments Clause of the Constitution. n9 In Reuss v. Balles, n10 we held
that a Member of the House of Representatives lacked standing to maintain such
an action in his capacity either as a legislator or as a private bondholder.
With regard to the latter asserted basis for standing, the court held that the
plaintiff had failed to allege specific injury to the value of his financial
holdings. The court further stated that, even if the plaintiff could allege a
more concrete injury, he would have difficulty establishing that the injury was
caused to a sufficient degree by the alleged violation and was likely to be
redressed by a favorable decision. n11
Three years later, in Riegle v. FOMC, n12 the court
was again presented with the challenge to the composition of the FOMC. In
Riegle, the court held that HN2a United States Senator had standing on the
basis of his asserted right under the Appointments Clause to vote on the
nominations of all members of the FOMC. n13 However, the court exercised its
equitable discretion to decline to decide the merits of Senator Riegle's claim
on the ground that adjudication would improperly interfere with the legislative
process by intervening in a dispute that was essentially one between the
plaintiff and his fellow legislators. n14
The present action was filed in the District Court
in June 1983 by the Committee for Monetary Reform, a non-profit corporation,
and over 800 other corporations, businesses and individuals who alleged that
they were "directly affected by the money supply policies of the Federal
Reserve System and in particular have been damaged financially by the
devastatingly high interest rates caused by its policies and by the recession
which those policies produced." n15 The complaint charged that, in
managing the nation's money supply, the Federal Reserve System had been
operating unlawfully in three respects. n16 First, as in Reuss and Riegle, the
plaintiffs claimed that the FOMC exercised significant governmental authority
and that all of its members were therefore "Officers of the United
States" required to be appointed in the manner prescribed by the
Appointments Clause. Second, the complaint charged that the inclusion on the
FOMC of members whose selection was ultimately controlled by commercial banks
violated due process by delegating authority to individuals directly interested
in the operations of the regulatory body. Third, the plaintiffs maintained that
four statutes that authorize the Federal Reserve System to control the money
supply, 12 U.S.C. §§ 225a, 263, 357 and 462b, "represent an unconstitutional
delegation of the Article I, Section 8 power of Congress, "To coin money
[and] regulate the value thereof . . .' in that neither they nor any other
statutes provide any meaningful criteria to guide the administrative exercise
of the power so delegated." n17
The District Court ruled that the plaintiffs lacked
standing and therefore granted the defendants' motion to dismiss. Assuming for
purposes of analysis that the plaintiffs had suffered injury in fact, the court
held that they had failed to allege facts sufficient to support a finding that
their injuries were caused by the alleged constitutional violations or that a
favorable decision would be likely to redress their injuries. n18 This appeal
followed.
II. STANDING
In essence the question of standing is whether the
litigant is entitled to have the court decide the merits of the dispute or of
particular issues." n19 In recent years, the Supreme Court has articulated
several constitutional requirements that a litigant must satisfy to establish
standing:
Art. III requires the party who invokes the court's
authority to show [1] that he personally has suffered some actual or threatened
injury as a result of the putatively illegal conduct of the defendant, and that
the injury [2] fairly can be traced to the challenged action and [3] is likely
to be redressed by a favorable decision. n20
In the present case, the appellants advance two
theories to support their standing. First, the appellants contend that they
have suffered economic harm as a consequence of the alleged constitutional
violations. Second, they rely on several cases that have recognized standing
under certain circumstances to challenge the authority of agencies on
separation of powers grounds. We find both of these theories insufficient to
establish standing in this case.
A.
Economic Harm Caused by the Violations
The appellants -- who include businesses, building
associations, farmers, a labor union, and private individuals -- allege that
they suffered serious financial damage as a result of monetary instability and
high interest rates in recent years. n21 We may assume that these allegations
are sufficient to meet the requirement of injury in fact. We agree with the
District Court, however, that the appellants have failed to show that their injuries
are fairly traceable to the asserted constitutional violations.
In their complaint, the appellants assert in general
terms that monetary instability and high interest rates are "a direct
result of the participation of the Federal Reserve Bank representatives . . .
in the policymaking function of the Federal Open Market Committee" and of
the "unconstitutional delegation of legislative power" to the Federal
Reserve System. n22 As developed in their declarations and briefs, the appellants'
theory of causation apparently runs as follows. Although the Reserve Bank
members are a minority on the FOMC, they play a significant role in the FOMC
decisionmaking process, which operates by consensus. The participation of
members who are unaccountable to democratic control, and who represent the
interests of commercial banks, leads to FOMC decisions to reduce or limit the
growth of the money supply. The implementation of such decisions, in turn,
inevitably leads to higher interest rates, which are driven yet higher by
uncertainty over the future value of money caused by the unrestricted
delegation of power to the Federal Reserve System. Finally, high interest rates
immediately cause the appellants' injuries. n23
In our view, "the links in the chain of
causation between the [alleged constitutional violations] and the asserted
injury are far too weak for the chain as a whole to sustain [the appellants']
standing." n24 It is entirely speculative whether the influence of the
Reserve Bank members is responsible for the FOMC's alleged pursuit of
restrictive or erratic monetary policies. Moreover, in light of the complexity
of the modern economy, it is also highly uncertain whether and to what extent
such policies were responsible for the adverse economic conditions that allegedly
resulted in harm to the appellants. Similarly, the appellants have given no
indication as to how they can succeed in establishing that an overly broad
delegation of power to the Federal Reserve System has had the consequence of
undermining economic certainty and thereby increasing interest rates. Such
general assertions are clearly inadequate to meet the constitutional
requirement that parties allege specific facts sufficient to establish that
their injuries are fairly traceable to the alleged violations. We think that
courts lack both the competence and the authority to determine such abstract
issues, which are better addressed through political and economic debate over
the role of monetary policy in the national economy.
Similarly, we think that the District Court
correctly concluded that the appellants had failed to show that their injuries
were likely to be redressed by the requested relief. The appellants maintain
that,
once the [Reserve Bank members] no longer are
empowered to influence the growth or contraction of the money supply (and
thence the value of the dollar), and control is revested in persons subject to
the democratic process, then the value of the dollar will be regulated
according to the public interest, and not according to the interest of
commercial banks. This will have two salutary effects on interests of
appellants herein. First, with control over the money supply vested in
individuals who do not work for those who profit by high interest rates, there
will be less incentive for high interest rates to be "mandated" by
artificial contraction of the money supply. Second, when democratic control
over the money supply is brought about, there will be renewed confidence on the
part of those who lend money as to the future value of the dollar, thus
bringing about lower interest rates because there will be no need to
"hedge" against future manipulation of the value of the dollar by
private parties. n25
We find these contentions far too speculative to
meet the redressability requirement.
Accordingly, we conclude that the appellants'
allegations that they have suffered economic harm as a consequence of the
alleged constitutional violations is insufficient to support their standing in
this case.
B. Challenge to Agency Authority on Separation of
Powers Grounds
Alternatively, and in our view more tenably, the
appellants seek to base their standing on the principle articulated in Buckley
v. Valeo, n26 in which the Supreme Court, sustaining a challenge to the
composition of the Federal Election
Commission on Appointments Clause grounds, held that "HN5party litigants
with sufficient concrete interests at stake may have standing to raise
constitutional questions of separation of powers with respect to an agency
designated to adjudicate their rights." n27 In order to establish standing
under this principle, a party is not required to show that he has received less
favorable treatment than he would have if the agency were lawfully constituted
and otherwise authorized to discharge its functions. n28
We do not read Buckley v. Valeo to establish a
principle of standing broad enough to encompass the appellants. By contrast to
the litigants in Buckley, the appellants here do not allege they are directly
subject to the governmental authority they seek to challenge, but merely assert
that they are substantially affected by the exercise of that authority. n29 We
believe that HN6to allow all persons indirectly affected by an agency's
decision to challenge its constitutional authority would open up the courts to
"'generalized grievances' shared in substantially equal measure by all or
a large class of citizens," and thereby require the courts "to decide
abstract questions of wide public significance even though other governmental
institutions may be more competent to address the questions and even though
judicial intervention may be unnecessary to protect individual rights."
n30 Consequently, we conclude that litigants have standing to challenge the
authority of an agency on separation-of-powers grounds only where they are
directly subject to the authority of the agency, whether such authority is
regulatory, administrative, or adjudicative in nature. n31 In the present case,
it is clear that the FOMC and the
Federal Reserve System in no way exercise direct governmental authority over
the appellants. We therefore conclude that the Buckley principle fails to
support the appellants' standing in the present case.
III. CONCLUSION
Because the appellants are unable to establish
either that their financial losses are fairly traceable to the asserted
constitutional violations or that they are directly subject to the agency
authority they seek to challenge, we hold that they lack standing to maintain
the present action.
Contrary to the appellants' contentions, our
decision in Riegle v. FOMC n32 does not compel a different result. In Riegle,
the court ruled that a United States Senator had standing as a legislator to
challenge the composition of the FOMC, but declined to adjudicate the merits of
the action under the doctrine of equitable discretion, viewing the dispute as
primarily one between the plaintiff and his fellow legislators. n33 While the
court based its decision primarily on the ground that "judicial action
would improperly interfere with the legislative process," n34 the court
also relied on the likelihood that a private plaintiff could acquire standing
to raise a similar claim without implicating the separation-of-powers concerns
that counseled dismissal of a legislative plaintiff. n35
Footnotes:
n1 Committee for Monetary Reform v. Board of Governors of Federal
Reserve Sys., No. 83-1730 (D.D.C. Oct. 26, 1983) (Pratt, J.), reprinted in
Joint Appendix ("J.A.") 322.
n2 For accounts of the history, structure and operations of the
Federal Reserve System and the FOMC, see Riegle v. FOMC, 211 App. D.C. 284, 656
F.2d 873, 874-76 (D.C. Cir.), cert. denied, 454 U.S. 1082, 70 L. Ed. 2d 616,
102 S. Ct. 636 (1981); Reuss v. Balles, 189 U.S. App. D.C. 303, 584 F.2d 461,
462-64 (D.C. Cir.), cert. denied, 439 U.S. 997, 99 S. Ct. 598, 58 L. Ed. 2d 670
(1978); see also FOMC v. Merrill, 443 U.S. 340, 343-47, 61 L. Ed. 2d 587, 99 S.
Ct. 2800 (1979).
n3 12 U.S.C. § 263(b) (1982). All statutory references herein are
to Title 12 of the United States Code. [**5]
n4 § 241.
n5 § 263(a).
n6 § 321.
n7 §§ 302, 304.
n8 §§ 248, 341.
n9 Article II, section 2, clause 2, states, in pertinent part:
[The President] . . . shall nominate, and by and with the Advice
and Consent of the Senate, shall appoint Ambassadors, other public Ministers
and Consuls, Judges of the Supreme Court, and all other Officers of the United
States, whose Appointments are not herein otherwise provided for, and which
shall be established by Law: but the Congress may by Law vest the Appointment
of such inferior Officers, as they think proper, in the President alone, in the
Courts of Law, or in the Heads of Departments.
n10 189 App. D.C. 303, 584 F.2d 461 (D.C. Cir.), cert. denied, 439
U.S. 997, 99 S. Ct. 598, 58 L. Ed. 2d 670 (1978).
n11 Id. at 469.
n12 211 App. D.C. 284, 656 F.2d 873 (D.C. Cir.), cert. denied, 454
U.S. 1082, 102 S. Ct. 636, 70 L. Ed. 2d 616 (1981). [**7]
n13 Id. at 877-79.
n14 Id. at 881-82.
n15 First Amended Complaint for Declaratory and Injunctive Relief
para. 2, reprinted in J.A. 102.
n16 Id. para. 1, J.A. 102.
n17 Id. paras. 41-42, J.A. 123-24. Section 225a instructs the
Board of Governors and the FOMC to "maintain long run growth of the
monetary and credit aggregates commensurate with the economy's long run
potential to increase production, so as to promote effectively the goals of
maximum employment, stable prices, and moderate long-term interest rates."
Section 263(c) directs the FOMC to conduct open market operations "with a
view to accommodating commerce and business and with regard to their bearing
upon the general credit situation of the country." In similar terms, § 357
requires the Federal Reserve Banks, subject to review by the Federal Reserve
Board, to fix the discount rates charged member banks "with a view of
accommodating commerce and business." Finally, former § 462b authorized
the Board of Governors to change reserve requirements "in order to prevent
injurious credit expansion or contraction."
n18 Slip op. at 5-9, J.A. 326-30.
n19 Warth v. Seldin, 422 U.S. 490, 498, 45 L. Ed. 2d 343, 95 S.
Ct. 2197 (1975).
n20 Valley Forge Christian College v. Americans United for
Separation of Church & State, 454 U.S. 464, 472, 70 L. Ed. 2d 700, 102 S.
Ct. 752 (1982) (citations and internal quotations omitted).
n21 Amended Complaint paras. 8-16, J.A. 104-16.
n22 Id. paras. 26, 43, J.A. 119, 124.
n23 See Brief for Appellants at 10-12, 41-45, 49-51; Declaration
of Robert D. Auerbach, J.A. 256.
n24 Allen v. Wright, 468 U.S. 737, 104 S. Ct. 3315, 3329, 82 L.
Ed. 2d 556 (1984).
n25 Brief for Appellants at 44-45.
n26 424 U.S. 1, 96 S. Ct. 612, 46 L. Ed. 2d 659 (1976) (per
curiam).
n27 Id. at 117 (citing Palmore v. United States, 411 U.S. 389, 36
L. Ed. 2d 342, 93 S. Ct. 1670 (1973); Glidden Co. v. Zdanok, 370 U.S. 530, 8 L.
Ed. 2d 671, 82 S. Ct. 1459 (1962); Coleman v. Miller, 307 U.S. 433, 83 L. Ed.
1385, 59 S. Ct. 972 (1939)).
n28 See, e.g., Glidden Co., 370 U.S. at 533 (plurality opinion)
("The claim advanced by the petitioners, that they were denied the protection
of judges with tenure and compensation guaranteed by Article III, has nothing
to do with the manner in which either of these judges conducted himself in
these proceedings. . . . Article III, § 1, . . . is explicit and gives the
petitioners a basis for complaint without requiring them to point to particular
instances of mistreatment in the record.").
n29 See Brief for Appellants at 44.
n30 Warth v. Seldin, 422 U.S. at 499, 500.
n31 See, e.g., Buckley 424 U.S. at 110-13 (describing the extensive
rulemaking, adjudicative and enforcement powers of the FEC); Glidden Co., 370
U.S. 530, 8 L. Ed. 2d 671, 82 S. Ct. 1459 (recognizing standing of civil and
criminal defendants to challenge jurisdiction of judges on ground that they
lack Article III tenure and salary protections); Andrade v. Lauer, 234 U.S.
App. D.C. 384, 729 F.2d 1475, 1494-96 (D.C. Cir. 1984) (employees adversely
affected by reduction in force have standing to raise Appointments Clause
challenge to authority of agency officials).
n32 211 App. D.C. 284, 656 F.2d 873 (D.C. Cir.), cert. denied, 454
U.S. 1082, 102 S. Ct. 636, 70 L. Ed. 2d 616 (1981). [**20]
n33 Id. at 881.
n34 Id. at 882.
n35 Id. at 881-82.
n36 Id. at 881.
n37 We note that Riegle was decided prior to the Supreme Court's
most recent articulations of the constitutional requirements for standing in
Valley Forge and Allen v. Wright.
n38 The appellants, interpreting Riegle and subsequent decisions
to hold that dismissal of a legislator's action under the doctrine of equitable
discretion is appropriate only where a private plaintiff would have standing to
raise the constitutional issue, contend that, if they are held to lack
standing, a subsequent action brought by a Senator may not be dismissed on
prudential grounds. Brief for Appellants at 5-7, 45-49. We find it unnecessary
to speculate on the appropriate disposition of such a case, and accordingly
express no opinion on the question, the resolution of which must await another
day.