January 4, 2017
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. 15 C 6033 - James
B. Zagel, Judge.
Posner, Easterbrook, and Sykes, Circuit Judges.
Easterbrook, Circuit Judge.
Bank is insured and regulated by the Federal Deposit
Insurance Corporation, which conducts a "full-scope,
on-site examination" every 12 to 18 months. 12 U.S.C.
§1820(d). After an examination in June 2015 the FDIC
assigned the Bank a rating of 4 under the Uniform Financial
Institutions Rating System. The parties call this a CAMELS
rating, after the System's six compo- nents: capital,
asset quality, management, earnings, liquidity, and
sensitivity. The highest rating is 1, the lowest 5. The Bank
contends in this suit under the Administrative Procedure Act
that its rating should have been 3 and that the lower rating
is arbitrary and capricious. But the district court dismissed
the suit for want of jurisdiction, ruling that the assignment
of ratings is committed to agency discretion by law. 5 U.S.C.
circuits have called rulings under §701 (a)(2)
jurisdictional, see, e.g., Flint v. United States,
906 F.2d 471, 476 (9th Cir. 1990); Lunney v. United
States, 319 F.3d 550, 551 (2d Cir. 2003); Tsegay v.
Ashcroft, 386 F.3d 1347, 1349 (10th Cir. 2004), but ours
is not among them. When a private party seeks judicial review
of administrative action, 5 U.S.C. §702 and 28 U.S.C.
§1346(a)(2) supply subject-matter jurisdiction. If there
are no standards for judicial review (the usual meaning of
"committed to agency discretion by law, " see
Heckler v. Chaney, 470 U.S. 821, 830 (1985)), then
the court dismisses the suit on the merits because the
plaintiff can't show that the agency's action was
unlawful. That's the conclusion of Vahora v.
Holder, 626 F.3d 907, 916-17 (7th Cir. 2010). Accord,
Oryszak v. Sullivan, 576 F.3d 522, 526 (D.C. Cir.
2009); Ochoa v. Holder, 604 F.3d 546, 549 (8th Cir.
2010). Older decisions such as Flint precede, or do
not discuss, the Supreme Court's modern effort to
distinguish truly jurisdictional rules from case-processing
doctrines. See, e.g., United States v. Kwai Fun
Wong, 135 S.Ct. 1625 (2015); Sebelius v. Auburn
Regional Medical Center, 133 S.Ct. 817 (2013).
ago this court sometimes used the word
"jurisdiction" to refer to all doctrines that
foreclose judicial review. Arnow v. NRC, 868 F.2d
223 (7th Cir. 1989), is one illustration. But loose usage
does not establish a holding, see Reed Elsevier, Inc. v.
Muchnick, 559 U.S. 154, 161 (2010), or survive the
Justices' recent insistence that "jurisdiction"
means a tribunal's adjudicatory competence, not whether a
litigant has an ironclad defense. Section 701(a)(2), which
prevents review of matters committed to agency discretion by
law, does not refer to or limit §702, which creates
subject-matter jurisdiction for claims under the APA. And
when the Supreme Court has considered arguments under
§701(a)(2), it has done so on the merits; it has not
ordered the cases remanded with instructions to dismiss for
want of jurisdiction. See, e.g., Lincoln v. Vigil,
508 U.S. 182 (1993); Webster v. Doe, 486 U.S. 592
(1988). Section 701(a)(2) is no more a limit on
subject-matter jurisdiction than are doctrines of absolute
and qualified immunity, statutes of limitations, and many
other rules that prevent courts from deciding whether the
defendant acted properly.
the distinction between jurisdictional and other rules is
important, because courts must enforce the limits on
subject-matter jurisdiction even when the litigants prefer a
decision on the merits. If §701(a)(2) curtails
jurisdiction, then courts must decide in every case
under the APA whether some statute or doctrine provides the
agency with discretion. The court would have to raise the
issue on its own, comb the statute books for grants of
discretion, and so on, even if the agency never contended
that its action came within §701(a)(2). Congress could
require this, but the language of §701(a)(2) does not
foreclose the possibility of waiver or forfeiture. We do not
see a reason to depart from Vahora's conclusion
that the extent of agency discretion concerns the merits, not
jurisdiction-unless a particular statute designates the
subject as jurisdictional.
distinction between jurisdiction and the merits matters here
not only because the district court (wrongly) concluded that
it lacks jurisdiction but also because the FDIC has bypassed
two other procedural reasons why it might prevail.
First, APA review normally is limited to final agency
actions. See, e.g., FTC v. Standard Oil Co. of
California, 449 U.S. 232 (1980). Assignment of a CAMELS
rating does not appear to be a final decision. It might be
the basis of an administrative order directing a bank to
change certain practices or desist from others, see 12 U.S.C.
§1818(b), (c), (d), but the FDIC has not issued such an
order to the Bank. The CAMELS rating affects how much a bank
must pay for deposit insurance, but the Bank has not asked
the court to order the FDIC to lower its rates. Second, the
Bank failed to take advantage of the opportunity to have the
FDIC's Supervision Appeals Review Committee review the
rating. See 77 Fed. Reg. 17055-2 (Mar. 23, 2012).
understand the law, however, the absence of a final decision
would be just another reason to dismiss the suit-provided
that there is a live controversy between the Bank and the
FDIC. The effect of CAMELS ratings on insurance premiums
creates a concrete stake that makes the current dispute
justiciable. Cf. Sackett v. EPA, 566 U.S. 120 (2012)
(dispute about classification of property as a wetland is
justiciable even though additional steps may be required
before a final remedy). The possibility of pre-enf or cement
review under decisions such as Sackett and
Association of Data Processing Service Organizations,
Inc. v. Camp, 397 U.S. 150 (1970), shows that a
litigant-specific final decision is not a jurisdictional
requirement. That the Bank may have sought judicial review
prematurely therefore does not require a court to dismiss the
suit when the agency has acquiesced in immediate review.
from its jurisdictional argument, the FDIC maintains that the
CAMELS rating is unreviewable because it has discretion to
set appropriate levels of capital. It relies particularly on
12 U.S.C. §3907(a)(2): "Each appropriate Federal
banking agency shall have the authority to establish such
minimum level of capital for a banking institution as the
appropriate Federal banking agency in its discretion, deems
to be necessary or appropriate in light of the particular
circumstances of the banking institution." We shall
assume that the agency's discretion is so unconfined that
the law commits the subject to administrative discretion
under §701(a)(2). So Frontier State Bank v.
FDIC, 702 F.3d 588, 593-97 (10th Cir. 2012), holds, and
the Bank does not ask us to disagree.
the Bank reminds us that CAMELS stands for "capital,
asset quality, management, earnings, liquidity, and
sensitivity". Each of the six factors is rated
separately on a scale of 1 to 5, and the rating as a whole
aggregates those six factors. The FDIC's statement of
policy, see 62 Fed. Reg. 752 (Jan. 6, 1997), explains the
process. Suppose the FDIC's team of examiners were to
conclude that the Bank had adequate capital deserving a
rating of 1 but that other components were unfavorable,
leading to an overall rating of 4. The examiners may be right
or wrong about those other issues, but a district court could
ask whether the FDIC's final rating was arbitrary, or
supported by substantial evidence, without making any inroad
on the agency's discretion to evaluate a bank's
what happened in Frontier State Bank, which in the
course of reviewing a cease-and-desist order reviewed man-
agement, liquidity, and interest-rate-sensitivity issues
while concluding that capital adequacy is unreviewable. 702
F.3d at 597-604. The sort of issues reviewed in Frontier
State Bank affect CAMELS ratings. If those subjects
could be reviewed there, notwithstanding the Tenth
Circuit's conclusion that capital adequacy is within the
FDIC's discretion, they can be reviewed in this
litigation as well.
it would be possible for a court to review the capital rating
itself without transgressing §3907(a)(2). Suppose the
FDIC were to decide that Builders Bank needs $5 million in
net capital in order to operate safely but has only $4
million. Section 3907(a)(2) puts the $5 million floor beyond
judicial questioning. But the statute does not insulate the
agency's math. If the Bank were to contend that the
examiners found that it fell short of $5 million because they
had mistakenly treated a $1 million asset as a $1 million
liability, turning $6 million of net capital into $4 million
by error, a court would not impinge on the statutory