Fourth Corner Credit Union v. Federal Reserve Bank of Kansas City

In 2012, Colorado amended its constitution to legalize recreational marijuana. In response, an industry of marijuana growers and retailers developed. Traditional banks were wary of serving these marijuana-related businesses (MRBs) because many MRBs operated solely in cash, which gave rise to public safety and regulatory concerns. The Fourth Corner Credit Union (Fourth Corner) (plaintiff) sought to fill the banking void and provide banking services to cannabis and hemp businesses and marijuana-legalization supporters. Fourth Corner applied to the Federal Reserve Bank of Kansas City (Reserve Bank) (defendant) for a master account. A master account gave depository institutions access to the Federal Reserve System’s services, including its electronic payments system, and was essentially a bank account for banks. Reserve Bank denied Fourth Corner’s application because serving MRBs posed too great of a risk to the Federal Reserve System. Fourth Corner filed suit in district court seeking a declaratory judgment that Fourth Corner was entitled to a master account and an injunction requiring Reserve Bank to issue a master account to Fourth Corner. Reserve Bank moved to dismiss, arguing that Fourth Corner would use the master account to violate federal drug laws under the Controlled Substances Act (CSA). The CSA prohibited any person to manufacture, distribute, dispense, or possess with intent to manufacture, distribute, or dispense a controlled substance. Under the CSA, marijuana was a controlled substance. Fourth Corner filed a motion for summary judgment on its claim and argued that it would only serve MRBs if it was authorized to do so by law. The district court granted Reserve Bank’s motion to dismiss. Fourth Corner filed a motion for reconsideration. The district court denied the motion, and Fourth Corner appealed.