National Automobile Dealers Ass'n v. Federal Trade Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Decided March 6, 2012

No. 11-1313

NATIONAL AUTOMOBILE DEALERS ASSOCIATION,

PETITIONER

v.

FEDERAL TRADE COMMISSION,

RESPONDENT

On Motion To Dismiss For Lack of Jurisdiction

Willard K. Tom, John F. Daly, and David L. Sieradzki filed

the motion to dismiss for respondent Federal Trade

Commission.

Gabriel A. Crowson, Gerard E. Wimberly, Jr., Daniel T.

Plunkett, and Michael G. Charapp filed the response for

petitioner National Automobile Dealers Association.

Before: ROGERS, GARLAND, and BROWN, Circuit Judges.

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Opinion for the Court filed by Circuit Judge GARLAND.

GARLAND, Circuit Judge: The National Automobile

Dealers Association petitions for review of the Federal Trade

Commission’s interpretation of statutory language contained in

a provision of the amended Fair Credit Reporting Act, 15 U.S.C.

§ 1681m(h). The Commission announced this interpretation in

a Federal Register notice accompanying its promulgation of an

amended rule regulating “risk-based pricing” of consumer

credit. Because a challenge to such an interpretation must begin

in the district court, we dismiss the Association’s petition for

lack of jurisdiction.

I

In 2003, Congress passed the Fair and Accurate Credit

Transactions Act (FACT Act), Pub. L. No. 108-159, 117 Stat.

1952 (2003), as an amendment to the Fair Credit Reporting Act

(FCRA), 15 U.S.C. §§ 1681 et seq. Among other things, FACT

Act § 311 inserted into the FCRA a new section 615(h), a

provision that governs the “[d]uties of users in certain

[consumer] credit transactions.” 15 U.S.C. § 1681m(h). That

provision addresses a practice known as “risk-based pricing,”

and provides statutory protections for consumers who, based on

information contained in their “consumer report[s],” are offered

credit at “materially less favorable [terms] than the most

favorable terms available to a substantial proportion of

consumers.” Id. § 1681m(h)(1).1 In such circumstances, the

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“Risk-based pricing” refers to the practice of setting or adjusting

the terms of credit offered to a consumer to reflect the risk of

nonpayment by that consumer. “Creditors that engage in risk-based

pricing generally offer more favorable terms to consumers with good

credit histories and less favorable terms to consumers with poor credit

histories.” Fair Credit Reporting Risk-Based Pricing Regulations,

Final Rules, 76 Fed. Reg. 41,602, 41,603 (July 15, 2011).

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amended FCRA entitles prospective buyers to receive a “risk-

based pricing notice” alerting them to the potential existence of

negative information in their credit reports, so that they can

check their credit histories and correct any inaccuracies. See

Fair Credit Reporting Risk-Based Pricing Regulations, Final

Rules, 76 Fed. Reg. 41,602, 41,603 (July 15, 2011). Under the

FCRA, “any person” who “uses a consumer report in connection

with an application for, or a grant, extension, or other provision

of, credit” is required to provide risk-based pricing notices. 15

U.S.C. § 1681m(h)(1) (emphasis added).

The Dodd-Frank Wall Street Reform and Consumer

Protection Act (Dodd-Frank Act), Pub. L. No. 111-203, 124

Stat. 1376 (2010), signed into law on July 21, 2010, amended

the FCRA’s risk-based pricing protections. In particular, section

1100F of the Dodd-Frank Act strengthened consumers’ rights by

requiring that risk-based pricing notices include a consumer’s

credit score if that credit score was used in making the credit

decision. To implement this change, the Federal Trade

Commission (FTC) and the Board of Governors of the Federal

Reserve System promulgated amendments to their respective

risk-based pricing rules on July 15, 2011. The amendments,

codified at 16 C.F.R. Part 640, “require disclosure of credit

scores and information relating to credit scores in risk-based

pricing notices if a credit score of the consumer is used in setting

the material terms of credit.” 76 Fed. Reg. 41,602.

Accompanying the promulgation of its amended rule, the

FTC published “Supplementary Information” in the Federal

Register that included the Commission’s responses to various

comments received during the notice-and-comment period. See

76 Fed. Reg. 41,606-07 & nn.5-9. Within this Supplementary

Information was the Commission’s interpretation of the scope

of the word “uses” as it is employed in the FCRA, 15 U.S.C.

§ 1681m(h)(1). As relevant here, the FTC construed the risk-

based pricing notice requirements in section 1681m(h) to apply

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to an automobile dealer that uses consumer reports to offer

materially less favorable credit terms to car buyers -- even when

the dealer “does not directly obtain the consumer report[s]

and/or credit score[s] from a consumer reporting agency” but

instead relies upon information provided by third-party

financing sources. 76 Fed. Reg. 41,606.

The National Automobile Dealers Association (NADA)

disputes the FTC’s interpretation of section 1681m(h). In

September 2011, NADA filed a petition for review in this court,

as well as a complaint in the United States District Court for the

District of Columbia. See Nat’l Auto. Dealers Ass’n v. FTC, No.

11-1313 (D.C. Cir. Sept. 9, 2011); Nat’l Auto. Dealers Ass’n v.

FTC, No. 1:11-cv-1711 (D.D.C. Sept. 22, 2011). Although the

petition is silent as to the petitioner’s cause of action, the

complaint filed in district court makes clear that NADA’s

challenge is brought pursuant to the Administrative Procedure

Act (APA), 5 U.S.C. §§ 701 et seq. The FTC filed a motion to

dismiss the petition on the ground that we lack appellate

jurisdiction. In response, NADA does not dispute that we lack

jurisdiction, but states that it filed the petition as a “protective

measure,” to ensure compliance with the relevant jurisdictional

deadlines “in the event that this Court (or the district court in the

related proceeding)” determines that its challenge is subject to

direct appellate review. Pet’r Resp. to Resp’t Mot. to Dismiss

at 2-3.

II

In this circuit, “the ‘normal default rule’ is that ‘persons

seeking review of agency action go first to district court rather

than to a court of appeals.’” Watts v. SEC, 482 F.3d 501, 505

(D.C. Cir. 2007) (quoting Int’l Bhd. of Teamsters v. Pena, 17

F.3d 1478, 1481 (D.C. Cir. 1994)). Initial review of agency

decisions “occurs at the appellate level only when a direct-

review statute specifically gives the court of appeals subject-

matter jurisdiction to directly review agency action.” Id.; see

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Micei Int’l v. Dep’t of Commerce, 613 F.3d 1147, 1151 (D.C.

Cir. 2010); Pub. Citizen, Inc. v. NHTSA, 489 F.3d 1279, 1287

(D.C. Cir. 2007). However, when a statute does grant direct

review, but its application to the agency action in question is

“ambiguous,” we will “not presume” that “Congress intended to

locate initial APA review of agency action in the district courts”

rather than the courts of appeals -- “[a]bsent a firm indication

that Congress [so] intended.” Fla. Power & Light Co. v. Lorion,

470 U.S. 729, 737, 745 (1985).

In this case, the direct review provision of the applicable

statute is not “ambiguous in any sense relevant,” and because it

plainly does not apply to the agency action that NADA

challenges, we lack appellate jurisdiction. Five Flags Pipe Line

Co. v. DOT, 854 F.2d 1438, 1441 (D.C. Cir. 1988); see Micei

Int’l, 613 F.3d at 1154; Pub. Citizen v. NHTSA, 489 F.3d at

1287-89; Hazardous Waste Treatment Council v. EPA, 910 F.2d

974, 976 (D.C. Cir. 1990). NADA’s petition invokes section

18(e)(1)(A) of the Federal Trade Commission Act (FTCA), 15

U.S.C. § 57a(e)(1)(A), as the sole jurisdictional basis for our

review. Pet. for Review at 1. Section 18(e)(1)(A) provides for

direct appellate review of “rule[s] . . . promulgated under

subsection (a)(1)(B) of this section.” 15 U.S.C. § 57a(e)(1)(A).

“A substantive amendment to . . . a rule promulgated under

subsection (a)(1)(B)” is also subject to direct review. Id.

§ 57a(d)(2)(B). Subsection (a)(1)(B), in turn, deals with a

limited category of FTC rules, known as “trade regulation

rules,” that “define with specificity acts or practices which are

unfair or deceptive acts or practices in or affecting commerce

(within the meaning of section 45(a)(1) of [the FTCA]).” Id.

§ 57a(a)(1)(B); see Am. Optometric Ass’n v. FTC, 626 F.2d 896,

899 (D.C. Cir. 1980). Reading these FTCA provisions together,

we have held that “direct review in the courts of appeals [under

FTCA § 18(d) or (e)] is only available for challenges to trade

regulation rules or substantive amendments of such rules.

Parties seeking review of other FTC actions must proceed . . . in

district court in the first instance.” Funeral Consumer Alliance,

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Inc. v. FTC, 481 F.3d 860, 862-63 (D.C. Cir. 2007) (internal

quotation marks omitted); see Pub. Citizen v. FTC, 829 F.2d

149, 150 (D.C. Cir. 1987) (per curiam).2

The interpretation that NADA challenges in this case is not

a trade regulation rule as defined by FTCA § 18(a)(1)(B). First,

NADA does not challenge a substantive rule (or a substantive

amendment) of any kind, but rather takes issue with the

Commission’s interpretation of a statutory term, offered in the

“Supplementary Information” accompanying the agency’s

promulgation of its amended risk-based pricing rule. Section

18(e)(1)(A) of the FTCA, however, makes clear that interpretive

rules are not included in its grant of direct appellate review. As

we have discussed, that section provides for direct appellate

review only of “rule[s] . . . promulgated under subsection

(a)(1)(B) of this section.” 15 U.S.C. § 57a(e)(1)(A) (emphasis

added). Subsection (a)(1)(B) authorizes the promulgation of

trade regulation rules. See id. § 57a(a)(1)(B). A different

subsection, subsection (a)(1)(A), authorizes the promulgation of

“interpretive rules . . . with respect to unfair or deceptive acts or

practices.” Id. § 57a(a)(1)(A). But that subsection is

conspicuously unmentioned in the direct review provision of

section 18(e)(1)(A). Accordingly, such interpretive rules may

not be challenged in this court in the first instance. Cf. Funeral

Consumer Alliance, 481 F.3d at 863 (holding that, because an

FTC letter was “at most” an “interpretation of [a] Rule rather

than a substantive amendment, . . . we thus lack jurisdiction over

the petition for review”).

2

See also Am. Optometric Ass’n, 626 F.2d at 905 (explaining that

Congress adopted special procedural protections and a unique avenue

of judicial review for trade regulation rules “[b]ecause of the

potentially pervasive and deep effect of rules defining what constitutes

unfair or deceptive acts or practices” (quoting H.R. Rep. No. 93-1107,

at 45-46 (1974))).

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Second, the interpretive statement that NADA challenges is

not even related to a trade regulation rule. As we have noted,

a trade regulation rule is one that “define[s] with specificity acts

or practices which are unfair or deceptive acts or practices . . .

within the meaning of” the FTCA. 15 U.S.C. § 57a(a)(1)(B).

The interpretation that NADA challenges, however, concerns the

meaning of the term “uses” in 15 U.S.C. § 1681m(h), which is

codified as part of the Dodd-Frank Act, the FACT Act, and the

FCRA -- but not the FTCA. Cf. Pub. Citizen v. FTC, 829 F.2d

at 150 (concluding that the review provision of FTCA

§ 18(e)(1)(A) “covers only review of rules promulgated under”

the FTCA). Moreover, the risk-based pricing requirements set

forth in section 1681m(h) and its implementing rules do not

“define with specificity acts or practices which are unfair or

deceptive.” 15 U.S.C. § 57a(a)(1)(B). Rather, they simply

mandate the provision of specified notices to consumers in order

to “alert[] [them] to the existence of negative information in

their consumer reports.” 76 Fed. Reg. 41,603.

There is, therefore, no statute that gives this court

jurisdiction to hear NADA’s petition on direct review.

Accordingly, we must dismiss the petition for lack of appellate

jurisdiction. And because the petitioner has -- quite

appropriately -- simultaneously filed a complaint in the district

court, we need not consider transferring the petition to that

court. See 28 U.S.C. § 1631; Five Flags, 854 F.2d at 1442. Our

dismissal of the petition is, of course, without prejudice to

NADA’s pursuit of its pending civil action in the district court.

See Micei Int’l, 613 F.3d at 1152 (noting that APA challenges

ordinarily “fall within the district court’s federal question

jurisdiction under 28 U.S.C. § 1331” (citing Bell v. New Jersey,

461 U.S. 773, 777 & n.3 (1983))); Funeral Consumer Alliance,

481 F.3d at 866 n.3 (“Although we do not have direct-review

jurisdiction over this petition under the FTCA, nothing in our

decision prevents petitioners from seeking review . . . in district

court under the Administrative Procedure Act.”).

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III

For the foregoing reasons, the FTC’s motion is granted and

the petition for review is

Dismissed.