UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 96-60218
AZTEC GENERAL AGENCY,
Petitioner,
VERSUS
FEDERAL DEPOSIT INSURANCE CORPORATION,
in its corporate capacity,
Respondent.
Petition for Review of an Order of the
Federal Deposit Insurance Corporation
(12-USC-1821(f)(4))
March 28, 1997
Before EMILIO M. GARZA, PARKER and DENNIS, Circuit Judges.
PER CURIAM:*
The Petitioner, Aztec General Agency ("Aztec"), appeals an
order of the Federal Deposit Insurance Corporation ("FDIC"), in
which the FDIC disallowed Aztec's claim for payment on
approximately fifty-four (54) Letters of Credit issued for the
benefit of Aztec. Finding that the FDIC's cursory denial
precluding Aztec's claim fails to provide a reasoned explanation
under the appropriate standard of review, we vacate and remand.
*
Pursuant to Local Rule 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in Local Rule 47.5.4.
Under the facts of this case, Aztec was the beneficiary of
approximately fifty-four (54) Letters of Credit issued by various
federally insured banks some of which failed and were taken over by
the FDIC.1 Aztec filed a claim with the FDIC to collect on the
Letters of Credit. Aztec claims that the Letters of Credit are
"insured deposits" pursuant to 12 U.S.C. §1813(l), and not
"standby" letters of credit. The United States Supreme Court in
Federal Deposit Ins. Corp. v. Philadelphia Gear Corp., 476 U.S.
426, 106 S. Ct. 1931, 90 L. Ed. 2d 428 (1986), set forth the test
to determine when a letter of credit is considered an insured
deposit under § 1813(l); whether the letter of credit is backed by
the customer's money or its equivalent in the issuer's (bank's)
custody, or is backed by some type of contingent liability.
The FDIC in its "Notice of Disallowance of Claim" provided a
cursory explanation for its denial. Specifically, the FDIC stated
that:
The Letters of Credit comprising your claim were secured
by contingent promissory notes, and no money or its
equivalent had been given for consideration. Therefore,
the Letters of Credit do not constitute insured deposits
as defined in 12 U.S.C. § 1813(l). Additionally, Aztec
cannot file under the claims procedure in regards to
these Letters of Credit, as the time frame for filing has
expired for all of the receiverships.
No documentation or further explanation was provided as to how the
FDIC arrived at its decision. Thereafter, Aztec filed its appeal
to this Court pursuant to 12 U.S.C. § 1821(f)(4).
1
It is unclear from the record before this Court which of
the LOCs were issued by banks that have failed and were taken over
by the FDIC and which were issued by banks that have not failed.
This distinction is not relevant to the issue before the Court.
2
Under the Administrative Procedures Act, the appropriate
standard of review by this Court of an agency decision is whether
the agency's decision was "arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law." See 5 U.S.C.
§ 706(2)(A). Under this standard, "our role is to review the
agency action to determine whether the decision ‘was based on a
consideration of the relevant factors and whether there was a clear
error of judgment.’" State of Louisiana, ex rel. Guste v. Verity,
853 F.2d 322, 327 (5th Cir. 1988) (quoting Motor Vehicles Mfrs.
Ass'n of the United States, Inc. v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 43, 103 S. Ct. 2856, 2866-67, 77 L. Ed. 2d 443
(1983)). It is these factors which the Supreme Court enunciated in
Philadelphia Gear that the FDIC must discuss in addressing Aztec's
claim in order for this Court to determine whether its decision was
arbitrary and capricious, an abuse of discretion, or not otherwise
in accordance with the law. As to the FDIC's conclusory
explanation that Aztec's claim was time barred, we find that the
FDIC failed to provide any analysis on this point.
Traditionally, the task of the reviewing court is to apply the
appropriate APA standard of review to the agency decision based on
the record the agency presents to the reviewing court. Citizens to
Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S. Ct. 814,
28 L. Ed. 2d 136 (1971). Thus, where an agency's decision is based
on an administrative record, the decision should be reviewed in
light of that record. Typically, the focal point for judicial
review should be the administrative record as it stood when the
3
agency acted, not a new record made initially in the reviewing
court. Camp v. Pitts, 411 U.S. 138, 142, 93 S. Ct. 1241, 1244, 36
L. Ed. 2d 106 (1973). The grounds upon which the agency acted must
be clearly disclosed in, and sustained by, the record. American
Petroleum Inst. v. EPA, 540 F.2d 1023, 1029 (10th Cir. 1976)
(construing Motor Vehicle Mfrs., 463 U.S. 29, 103 S. Ct. 2856).
The agency must make plain its course of inquiry, its analysis, and
its reasoning. Id. However, if the agency has failed to provide
a reasoned explanation for its action, or if limitations in the
administrative record make it impossible to conclude the action was
the product of reasoned decision making, the reviewing court should
ordinarily remand the case to the agency for further explanation.
Camp, 411 U.S. at 142, 93 S. Ct. at 1244; Motor Vehicle Mfrs., 463
U.S. at 50-57, 103 S. Ct. at 2870-74. Moreover, if the record
before the agency does not support the agency's decision, if the
agency has not considered all relevant factors, or if the reviewing
court simply cannot evaluate the challenged agency action on the
basis of the record before it, the proper course, except in rare
circumstances, is to remand to the agency for additional
explanation. Florida Power & Light Co. v. Lorion, 470 U.S. 729,
744, 105 S. Ct. 1598, 1607, 84 L. Ed. 2d 643 (1985).
Applying these standards to the case before us and the
administrative record presented to this Court,2 we conclude that
2
The administrative record presented for this Court's
review included only Aztec's claim with copies of the letters of
credit issued to Aztec and the FDIC's one-page denial of Aztec's
claim.
4
the FDIC's decision in this case was not accompanied by an adequate
basis and reasoned explanation in its denial of Aztec's claim. On
the one hand the FDIC, in its Summary of Argument3, states that its
"review of the records of the issuing institutions reveals that no
hard assets backed the issuance of Aztec's LOCs." However, the
FDIC further states that the deposit account records are lacking in
the administrative record, and that the records are stored in
warehouses spread over three cities. We find the FDIC's
explanation in denying Aztec's claim incongruous with its
assertions above given its declaration regarding the records
necessary to determine the correctness of Aztec's claim. Because
of the deficiencies in the administrative record, this Court is
unable to conduct a proper review and it is impossible to conclude
whether the FDIC's actions were the product of reasoned decision
making.
Therefore, based on the foregoing discussion, we VACATE the
FDIC's decision and REMAND this cause to the FDIC for proceedings
consistent with this opinion.
VACATED and REMANDED.
3
The FDIC failed to file its brief by the due date and its
motion to file brief out of time was denied. However, this Court
allowed the FDIC to file a four page "Summary of Argument" to which
we refer.
5