Very soon, briefing by the parties in the 10th Circuit will commence with respect to Colorado’s appeal of a preliminary injunction entered by the Federal District Court for the District of Colorado. The District Court enjoined the Colorado Attorney General and UCCC Administrator from applying to out-of-state, state banks making loans to Colorado residents its (1) recently enacted statute opting out of Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (the “DIDMCA”) (conferring on state-chartered, FDIC-insured banks the same right to export interest rates as Section 85 of the National Bank Act) pursuant to Section 525 of the DIDMCA and (2) Colorado’s usury laws. Section 525 of the DIDMCA confers on states the right to opt out of Section 521 of the DIDMCA only for “loans made” in the state that has opted out, and the District Court ruled that a loan is “made in” the bank’s state, not the borrower’s state.
Colorado has pending before the District Court a motion to stay the preliminary injunction order pending the outcome of the appeal. We previously blogged about Colorado’s brief supporting this motion and observed that there is no likelihood of the Court granting this motion and that it was filed as a prerequisite to later filing the same motion in the 10th Circuit. Under 10th Circuit precedent and Rule 8(a)(1) of the Federal Rules of Appellate Procedure, Colorado is entitled to a stay of the preliminary injunction order only if it can demonstrate to the Court (1) its likelihood of success on the merits of the appeal; (2) irreparable injury if the stay were denied; (3) that a stay would not substantially harm other parties to the litigation; and (4) that the public interests favor a stay.
The plaintiff-trade groups last week filed their opposition brief which made the following arguments:
- In response to Colorado’s argument that a loan can’t be “made” without there being a borrower involved as well, the plaintiffs make the point that while that is true, it is beside the point. It is also true that while a borrower can’t receive a loan unless a lender makes a loan, that doesn’t mean that a lender also receives a loan. In response to Colorado’s argument that the injunction undermines the intent of Congress with respect to Section 525 of DIDMCA, the plaintiffs argue that (1) the express language used in the statute (“loans made”) overrides Congressional intent and (2) Congressional intent with respect to Sections 521 and 525 was focused exclusively on loans made to borrowers within the opt-out state.
- Colorado’s argument that the plaintiffs have no legally cognizable cause of action is frivolous. As the District Court recognized, Ex Parte Young, 209 U.S. 123 (1908), allows suits in federal courts for injunctions against officials acting on behalf of states to proceed despite the State’s sovereign immunity when the State acted contrary to any federal law or contrary to the Constitution. Colorado argued that Ex Parte Young does not apply to lawsuits predicated on federal preemption of state laws because of the existence of the FDIC. There is nothing in the Federal Deposit Insurance Act that evinces any intent by Congress to preclude a lawsuit like the one brought here pursuant to Ex Parte Young.
- The Plaintiffs argue:
Colorado mischaracterizes the preliminary injunction as a “disfavored injunction,” and argues that the Court failed to apply the heightened standard required to grant one. Mot. 12-13. Colorado is incorrect on both counts. First, while the Court found it “doubtful” that the injunction sought by plaintiffs was disfavored, it also found that it “need not resolve that question, because … the plaintiffs have made a showing as to their likelihood of success on the merits and threatened irreparable harm sufficient to satisfy even the heightened standard for disfavored injunctions.” Order 6-7. So whatever standard applies, Plaintiffs have met it.
Second, Colorado is in any event incorrect that a heightened standard applies here: The preliminary injunction does not permanently enjoin Colorado’s interest rate caps, and it therefore does not afford Plaintiffs “all the relief that the moving party could expect from a trial win.” Free the Nipple-Fort Collins v. City of Fort Collins, 916 F.3d 792, 797-98 & n.3 (10th Cir. 2019) (stating application of the heightened standard “was likely in error” because “if the plaintiffs lose on the merits after a trial, then [the defendant] may fully enforce its public-nudity ordinance”); see also Order 6 n.2.
- As the District Court has already determined, the failure to enter a preliminary injunction would substantially harm the plaintiffs.
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