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Marshall & Ilsley Corp. v. Heimann

UNITED STATES COURT OF APPEALS, SEVENTH CIRCUIT


decided: June 12, 1981.

MARSHALL & ILSLEY CORPORATION, ET AL., PLAINTIFFS-APPELLANTS, V. JOHN G. HEIMANN, COMPTROLLER OF THE CURRENCY OF THE UNITED STATES, ET AL., DEFENDANTS-APPELLEES .

Appeal from the United States District Court for the Western District of Wisconsin. No. 78 C 42 -- Hubert L. Will, Judge .

Before Swygert and Sprecher, Circuit Judges, and Hoffman, Senior District Judge.*fn*

Author: Sprecher

This case arises out of the purchase of assets and assumption of liabilities of the Midland National Bank ("Midland") in Milwaukee, Wisconsin by defendant First Bank (N.A.) of LaCrosse, Wisconsin ("First Bank") and the establishment by First Bank of a new branch bank at the office formerly operated by Midland. These transactions were approved by the Comptroller of the Currency of the United States. Plaintiffs, three Milwaukee banks and the bank holding companies that own them, filed this action against the Comptroller, First Bank, and First Bank System, Inc., the holding company that owns First Bank. Plaintiffs allege that the Comptroller violated 12 U.S.C. § 36(c) and Wis.Stat. § 221.04(1)(j) by permitting First Bank to retain the former Midland office as a branch bank. Plaintiffs also allege that the acquisition of Midland by First Bank was, in reality, an acquisition by First Bank System, and thus, was a holding company acquisition over which the Comptroller had no jurisdiction and which the Comptroller had no authority to approve.

The district court dismissed plaintiffs' original complaint for lack of standing and failure to state a claim. The district court similarly dismissed plaintiffs' amended complaint for lack of standing. We affirm the dismissal of plaintiffs' complaints.

I

The parties disagree as to the facts properly before this court upon review of the district court's orders dismissing plaintiffs' complaints. Plaintiffs have moved to strike portions of First Bank's brief and appendix on the ground that they incorporate contested factual matters that properly were excluded by the district court in resolving the threshold issues of standing and jurisdiction. In particular, plaintiffs object to defendants' submission of materials supporting the Comptroller's finding that emergency measures were necessary in order to prevent the failure of Midland. We agree that only the record established in the district court, and not additional materials submitted by the Comptroller to this court on appeal, are properly before this court. We, therefore, draw no conclusions from the additional materials submitted and confine our review to the following uncontested facts.

By decision dated July 23, 1977, the Comptroller approved the application of First Bank*fn1 to purchase the assets and assume the liabilities of Midland.*fn2 At that time, Midland was the fourth largest bank in Wisconsin. First Bank was considerably smaller, but was and is owned by First Bank System, Inc., of Minneapolis, Minnesota, a bank holding company that controls many banks, with total deposits exceeding $6 billion. The Comptroller's decision was based upon his finding that, from the fall of 1975 through the spring of 1977, Midland suffered a severe and continuing deterioration in its asset structure, principally due to real estate loan problems. The Comptroller reasoned that the severity of the loan problems, as well as the volatility of the bank's deposit structure, threatened Midland's survival unless Midland received a massive injection of capital. The Comptroller considered First Bank's offer to purchase Midland a good solution that would avoid a bank failure and would insure uninterrupted services to Midland's customers.

Because the Comptroller regarded Midland's situation as an emergency, the Comptroller, pursuant to 12 U.S.C. § 181,*fn3 waived the requirement of shareholder approval and waived certain other requirements of bank mergers, pursuant to the Bank Merger Act, 12 U.S.C. § 1828(c).*fn4 The Comptroller also determined that the retention of Midland's existing office as a branch of First Bank was consistent with Wisconsin's emergency branch banking statute, Wis.Stat. § 221.04(1)(j)2, which is made applicable to national banks by 12 U.S.C. § 36(c).*fn5

In January, 1978, plaintiffs filed this action. The original complaint alleged that the Comptroller's approval of the establishment of a branch of First Bank in Milwaukee violated the applicable statutes which limit the establishment of branches by national banks. The original complaint also alleged that the Comptroller had exceeded his jurisdiction and had violated the Bank Holding Company Act, 12 U.S.C. § 1842, in purporting to approve an acquisition by First Bank which was actually an acquisition by First Bank System, Inc., a bank holding company located outside Wisconsin.

The initial decision of the district court, dated September 16, 1978, dismissed the branch banking claim in plaintiffs' complaint without prejudice. The court held that plaintiffs lacked standing with regard to the branch bank issue because they failed to allege "injury in fact." The district court dismissed the Bank Holding Company Act claim with prejudice, holding that no private right of action against the Comptroller could be derived from the Bank Holding Company Act.

Plaintiffs filed an amended complaint limited to the branch banking issue. By order dated June 30, 1980, the district court dismissed the amended complaint for lack of standing.

II

We deal first with plaintiffs' standing to assert the branch banking issues raised in plaintiffs' amended complaint.*fn6 Plaintiffs' amended complaint sets forth two alternative theories of how the Comptroller violated federal and state branch banking statutes: Count I alleges that allowing First Bank to acquire the former Midland facility as a branch violated 12 U.S.C. § 36 and the Wisconsin emergency branch banking statute, Wis.Stat. § 221.04(1)(j)2, because there was no "emergency" at the time the Comptroller acted; Count II alleges that, even if there was an emergency, the Comptroller violated Wis.Stat. § 221.04(1)(j)2 by failing to first offer plaintiffs the opportunity to acquire Midland.

As Justice Douglas stated in Association of Data Processing Service Organizations v. Camp, 397 U.S. 150, 151, 90 S. Ct. 827, 829, 25 L. Ed. 2d 184 (1970), "generalizations about standing to sue are largely worthless as such." One commentator has noted that the concept of standing is "among the most amorphous in the entire domain of public law." Hearings on S.2097 before the Subcommittee on Constitutional Rights of the Senate Judiciary Committee, 89th Cong., 2d Sess. 465, 498 (1966) (statement of Prof. Paul A. Freund), quoted in Flast v. Cohen, 392 U.S. 83, 99, 88 S. Ct. 1942, 1952, 20 L. Ed. 2d 947 (1968). In order to avoid confusion and inconsistency in analyzing standing questions, it is necessary to focus on the precise parties, injuries, interests, and statutes involved. Therefore, we must narrow our focus to the specific issue of standing of competitors to challenge agency action which results in allegedly illegal competition.

The general test for standing was first articulated by the Supreme Court in three cases involving competitors' challenges to Comptroller rulings allowing national banks to enter the competitors' fields. Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S. Ct. 827, 25 L. Ed. 2d 184 (1970) (data processing); Arnold Tours v. Camp, 400 U.S. 45, 91 S. Ct. 158, 27 L. Ed. 2d 179 (1970) (travel services); Investment Company Institute v. Camp, 401 U.S. 617, 91 S. Ct. 1091, 28 L. Ed. 2d 367 (1971) (mutual investment funds). The test enunciated in these cases gives meaning to the Administrative Procedure Act's grant of standing to persons "aggrieved by agency action within the meaning of a relevant statute...." 5 U.S.C. § 702.

The test has two prongs. The first part of the test requires that "the plaintiff alleges that the challenged action has caused him injury in fact, economic or otherwise." Data Processing, 397 U.S. at 152, 90 S. Ct. at 829. The second part of the test requires that "the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question." 397 U.S. at 153, 90 S. Ct. at 829.

A

We now consider the first requirement of standing, that there be an "injury in fact." This requirement assures satisfaction of the constitutional requirement of a "case or controversy." See Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 37-38, 96 S. Ct. 1917, 1923-24, 48 L. Ed. 2d 450 (1976). Plaintiffs' original complaint was dismissed because it did not include any allegations of injury in fact, economic or otherwise. The court refused to construe the complaint as alleging the adverse effect necessary to give plaintiffs standing and, consequently, dismissed with leave to amend.*fn7

In their amended complaint, plaintiffs allege that plaintiff banks and Midland were within a radius of one-half mile of each other and competed actively. Plaintiffs allege damages resulting from "illegally acquired changes in the competitive environment" caused by First Bank's acquisition of Midland.*fn8 The district court held that, although plaintiffs alleged that they and the new First Bank branch at the former Midland location were competitors, "plaintiffs' amended complaint still contains no allegation of any concrete or identifiable injury, whether economic or otherwise, caused them by the defendants' acts unless competition itself is somehow considered injurious." Marshall & Ilsley Corp. v. Heimann, No. 78-C-42, slip op. at 4 (W.D.Wis. June 30, 1980).

The Supreme Court has held, however, that an administrative agency's authorization of an allegedly illegal competitor or form of competition does constitute injury to competitors for standing purposes. In Data Processing, 397 U.S. 150, 90 S. Ct. 827, 25 L. Ed. 2d 184 (1970), Arnold Tours, 400 U.S. 45, 91 S. Ct. 158, 27 L. Ed. 2d 179 (1970), and Investment Company Institute, 401 U.S. 617, 91 S. Ct. 1091, 28 L. Ed. 2d 367 (1971), the Comptroller gave national banks permission to enter new areas of operation. "Injury in fact" flowed from the economic harm caused by an additional competitor. In Sierra Club v. Morton, 405 U.S. 727, 92 S. Ct. 1361, 31 L. Ed. 2d 636 (1972), the Court reaffirmed the Data Processing holding that harm to competitive position comprises "injury in fact":

In Data Processing, the injury claimed by the petitioners consisted of harm to their competitive position in the computer-servicing market through a ruling by the Comptroller of the Currency that national banks might perform data-processing services for their customers.... These palpable economic injuries have long been recognized as sufficient to lay the basis for standing, with or without a specific statutory provision for judicial review.

405 U.S. at 733-34, 92 S. Ct. at 1364-65 (footnote omitted).

Defendants argue that Data Processing and other cases challenging decisions by the Comptroller are distinguishable because, in those cases, competitive injury was readily inferred as a result of the Comptroller's authorization of new branches or new forms of competition.*fn9 Here, plaintiffs challenge the change of ownership of an existing bank. According to the district court, where there is "replacement" rather than "new" competition, competitive injury cannot be "assumed from the situation itself or inferred from plaintiffs' allegations." Marshall & Ilsley Corp. v. Heimann, No. 78-C-42, slip op. at 11 (W.D.Wis. Sept. 18, 1978). But, while the establishment of a new branch bank where there was no bank is certainly a more obvious form of competitive harm than the transformation of an existing bank into a branch bank, we do not find the differences between "new" and "replacement" competition decisive.

According to the cases involving "new" competition, if First Bank had attempted to establish a new branch in Milwaukee, plaintiffs would have standing to challenge the legality of that new branch; competitive injury would be assumed to flow from a new source of competition.*fn10 In this case, there can be no doubt that conversion of Wisconsin's fourth largest bank into a branch of a bank located in a different city and owned by an enormous bank holding company represents a change in the competitive configuration of Milwaukee's banking community. To hold that plaintiffs would satisfy the "injury in fact" requirement for purposes of challenging a totally new branch, no matter how small, but that plaintiffs must allege more specific and identifiable harm when the allegedly illegal branch is an acquired bank, would be absurd. We find that the allegations of competitive harm in plaintiffs' amended complaint are sufficient to satisfy the "injury in fact" prerequisite to standing. Cf. Leuthold v. Camp, 273 F. Supp. 695 (D.Mont.1967), aff'd, 405 F.2d 499 (9th Cir. 1969) (competitor challenge allowed although Comptroller's action did not increase the number of competitive banking facilities).

B

A showing of an injury in fact is a necessary, but not a sufficient, prerequisite for standing. Plaintiffs also must satisfy the second prong of the standing test, the "zone of interests" requirement. To satisfy this requirement, plaintiffs must show that the relevant statutes were meant to protect them from the type of competition threatened by defendants' actions. The "zone of interests" requirement is a prudential limitation, which has not been extensively developed by the Supreme Court since Data Processing. For this reason, the district court, in dismissing plaintiffs' original complaint, held that the requirements for standing are satisfied by a showing of an injury in fact, economic or otherwise, and that plaintiffs need not establish that they come within any "zone of interests."*fn11 We disagree.

This circuit consistently has required satisfaction of the zone of interests test for standing. Bradford School Bus Transit, Inc. v. Chicago Transit Authority, 537 F.2d 943, 946 (7th Cir. 1976), cert. denied, 429 U.S. 1066, 97 S. Ct. 797, 50 L. Ed. 2d 784 (1977); Apter v. Richardson, 510 F.2d 351, 353 (7th Cir. 1975). Although the Supreme Court has not elaborated on the zone of interests standard recently, the standard is still referred to by the Supreme Court as an element of the test for standing.*fn12 We further are persuaded of the standard's continuing vitality by the thoughtful and detailed discussion in Control Data Corp. v. Baldridge, No. 80-1143, slip op. at 13-17 (D.C.Cir. March 25, 1981). See also Tax Analysts & Advocates v. Blumenthal, 184 U.S. App. D.C. 238, 566 F.2d 130, 138-43 (D.C.Cir. 1977), cert. denied, 434 U.S. 1086, 98 S. Ct. 1280, 55 L. Ed. 2d 791 (1978). Therefore, although we find, contrary to the district court, that plaintiffs have alleged a personal stake and interest in the litigation which amounts to an "injury in fact," the standing issue is by no means decided. We must also decide whether the particular interest asserted by plaintiffs is arguably protected by the particular statutory provision involved. See Tax Analysts, 566 F.2d at 140.

We apply the zone of interests analysis separately to each count and each statute involved.

1

In Count I of their amended complaint, plaintiffs claim that there was no "emergency" at Midland that Midland was not in danger of failing. In order to satisfy the zone of interests test for Count I, plaintiffs' interests must be protected by the relevant emergency provisions. Only if plaintiffs have standing to dispute the emergency determination, do the particular banking claims in Count I become an issue.*fn13 Both state and federal statutory provisions concerning emergency measures that are permitted when a bank is near failure are involved here. While plaintiffs base their standing arguments on the state branch banking law, the federal emergency provisions invoked by the Comptroller also are relevant in determining the interests protected by the emergency branching statute.

a

First, we deal with the federal emergency statutes. The Comptroller may waive shareholder approval of the sale of assets and assumption of liabilities of a failing bank and may allow immediate consummation of the transaction pursuant to 12 U.S.C. §§ 181 and 1828(c).*fn14 Under each of these statutes, we find that plaintiffs' interests in preventing illegal competition are not within the zone of interests intended to be protected by the statutes.

The interests protected by 12 U.S.C. § 181 are clearly those of the shareholders of a bank being liquidated and, in situations where a bank is failing, those of shareholders and bank customers.*fn15 The reason for allowing waiver of shareholder approval is to prevent "delays in rendering financial assistance to national banks in emergency situations." Hearings on H.R. 6092 and H.R. 6093 before Subcommittee No. 2 of the House Committee on Banking and Currency, 86th Cong., 1st Sess. 39 (1959).

From this brief analysis of the statute, it is clear that competitors of an allegedly failing bank, unlike shareholders, are not among those whose interests are protected by 12 U.S.C. § 181. Plaintiffs, therefore, do not have standing to challenge the Comptroller's determination of an emergency based on that provision.

The other federal statutory provision involving the Comptroller's determination of an emergency is 12 U.S.C. § 1828(c). This portion of the Bank Merger Act concerns the antitrust implications of bank mergers. It establishes procedures "for the review of proposed bank mergers so as to eliminate the necessity for the dissolution of merged banks." H.Rep.No.1221, 89th Cong., 2d Sess. 1, reprinted in 1966 U.S.Code Cong. & Ad.News 1860. These procedures may be expedited when the responsible agency finds "that it must act immediately in order to prevent the probable failure of one of the banks involved." 12 U.S.C. § 1828(c)(3), (4), (6).

Under the Bank Merger Act, the Comptroller's determination of an emergency eliminates procedures for pre-merger examination of the antitrust implications of bank mergers. In order to fall within the zone of interests of 12 U.S.C. § 1828(c), plaintiffs must represent the particular competitive interest addressed by the statute the interest in preventing antitrust violations. Here, there is no allegation that First Bank's purchase of Midland violates any antitrust laws. Plaintiffs' "interest" is in avoiding competition from an illegal branch. This interest is very different from an interest in avoiding monopolization of the Milwaukee banking community.

In Control Data Corp. v. Baldridge, No. 80-1143, slip op. at 24-27 (D.C.Cir. March 25, 1981), the court held that plaintiffs are not within the zone of interests of a statute where their competitive interest does not match the particular interest in competition protected by that statute. Here, plaintiffs' general interest in competition does not match the antitrust interest of the statute. Therefore, we find that plaintiffs do not have standing to challenge the Comptroller's determination of an emergency under 12 U.S.C. § 1828(c).

b

Finally, we reach the question of whether plaintiffs' challenge to the Comptroller's determination of an emergency is within the zone of interests protected by the Wisconsin emergency branch banking statute, Wis.Stat. § 221.04(1)(j)2. Wisconsin branch banking law is relevant to the Midland transaction because, according to federal banking laws, the Comptroller may not approve a branch of a national bank unless state law prerequisites to branching are satisfied. 12 U.S.C. § 36(c).

In Wisconsin, branch banking is forbidden, except as provided by statute. Wis.Stat. § 221.04(1)(f). One statutory provision allows branch banking in a "bankless community." Wis.Stat. § 221.04(1)(j)1. This statute allows a bank to establish a branch in a municipality that has no bank or branch bank only if there is no bank or branch bank within three miles of the proposed branch and if the home bank is in the same county as the branch, or is in a contiguous county and within 25 miles of the branch.*fn16 Wis.Stat. § 221.04(1)(j)2 provides an exception to § 221.04(1)(j)1 in emergencies.

2. The limits set forth in subd. 1 may not apply to any emergency situation where the commissioner finds that a bank is failing and that it must be merged or consolidated with another bank and operated as a branch bank for the protection of the depositors of the failing bank and that the opportunity to merge or consolidate with the bank has been offered to and not accepted by all other banks within the geographical limits of subd. 1.

It is important to distinguish the zone of interests protected by the emergency branch banking statute, § 221.04(1)(j)2, from the zone of interests protected by the ordinary branch banking restrictions, § 221.04(1)(f), (i), (j) 1, and (1). Although plaintiffs do fall within the zone of interests of the ordinary, non-emergency branch banking provisions, we find that plaintiffs do not fall within the zone of interests protected by the Wisconsin emergency branch banking statute.

Competitors of a proposed branch generally are considered to be within the zone of interests of state laws restricting branch banking, which are made applicable to national banks by 12 U.S.C. § 36(c). The purpose of 12 U.S.C. § 36(c) is to place national and state banks on a basis of "competitive equality" with respect to branch banking. First Nat'l Bank of Logan v. Walker Bank & Trust Co., 385 U.S. 252, 261, 87 S. Ct. 492, 497, 17 L. Ed. 2d 343 (1966). Thus, both state and national banks that would compete with a proposed branch of a national bank are protected by 12 U.S.C. § 36(c) from illegally authorized competition.*fn17 In fact, in many cases where the Comptroller's approval of an allegedly illegal branch is challenged by a competitor, standing is simply assumed. See, e. g., State Bank of Rensselaer v. Heimann, 619 F.2d 679 (7th Cir. 1980); First Union Bank & Trust Co. of Winamac v. Heimann, 600 F.2d 91 (7th Cir.), cert. denied, 444 U.S. 950, 100 S. Ct. 493, 62 L. Ed. 2d 320 (1979); First Nat'l Bank of Crown Point v. Camp, 463 F.2d 595 (7th Cir. 1972); Marion Nat'l Bank v. Van Buren Bank, 418 F.2d 121, 123 (7th Cir. 1969).*fn18

The Wisconsin emergency statute, however, provides on its face that the decision that a bank is failing and must be operated as a branch of another bank is made "for the protection of depositors" (emphasis added). This language seems to indicate that competing banks are not within the zone of interests protected by the emergency branch banking statute. Attempting to avoid the clear statutory pronouncement, plaintiffs argue that, although the emergency procedures are meant to protect depositors of a failing bank, the threshold decision that the bank is failing may be challenged by competitors if that decision results in establishment of a branch bank that would be illegal in the absence of a failing bank emergency. The problem with plaintiffs' argument is that the emergency provision, in carving out an exception to the Wisconsin branch banking provisions, also carves out competitors' standing to challenge the application of the exception.

There are no Wisconsin cases discussing the zone of interests protected by the emergency branch provision,*fn19 but the provision is comparable to the emergency provisions in federal banking laws discussed earlier, 12 U.S.C. §§ 181 and 1828(c). The purpose of both the Wisconsin and federal emergency banking provisions is to restructure the assets and liabilities of a failing bank with a minimum of disruption of services to depositors. If other banks were allowed to challenge the Comptroller's determination of an emergency solely on the basis of their status as competitors, the objectives justifying these emergency procedures could be thwarted by the purely selfish desires of competitors to keep a new competitor out of the local banking community.

In addition to evincing an intent to protect depositors of a failing bank, § 221.04(1)(j)2 provides that when an emergency requires lifting the general prohibitions against branch banking, banks within the geographical limits of § 221.04(1)(j)1 must be offered the opportunity to merge or consolidate with the failing bank. Consequently, we must examine § 221.04(1)(j)1 to determine: (1) the meaning of the "geographical limits" referred to in § 221.04(1)(j)2 and (2) whether plaintiffs fit within those geographical limits.

What is meant by the geographical limits of § 221.04(1)(j)1 is not entirely clear from the face of § 221.04(1)(j)1. But we interpret*fn20 the phrase "banks within the geographical limits" to encompass those banks that meet all the limitations of § 221.04(1)(j)1 and, therefore, could have acquired the failing bank as a branch, pursuant to § 221.04(1)(j)1, even without an emergency. This interpretation thus entails geographical limitations on the failing bank, as well as on the acquiring bank. In other words, for the "offer" requirement to apply, the failing bank must be the only bank or branch bank in its municipality; there must be no bank or branch bank within three miles of the failing bank; and the acquiring bank must be either in the same county or in a contiguous county and within 25 miles of the failing bank. Only the banks within those geographical limits are entitled to an offer pursuant to § 221.04(1)(j)2.

The "offer" provision is an attempt to minimize the exceptions to the general rule on branching. The "offer" provision evinces an intent to have, whenever possible, even in an emergency, a branch bank/home bank relation that would be otherwise allowable under § 221.04(1)(j)1. We find that only a bank which meets the geographical requirements and which, therefore, could have operated the failing bank as a branch bank, comes within the zone of interests protected by the emergency branch banking statute's "offer" provision. Thus, only a bank which is entitled to an offer under the statute has standing to challenge the determination of an emergency.

The former Midland facility and plaintiffs' banks are all in Milwaukee and are within a one mile radius of each other. Thus, none of the plaintiffs could have qualified under § 221.04(1)(j)1 to acquire Midland as a branch. Since plaintiffs are not within the geographical limits of § 221.04(1)(j)1, they do not have standing to challenge the Comptroller's determination that Midland's condition warranted waiver of the usual geographical restrictions on branch banking. Consequently, even though plaintiffs are within the zone of interests of the ordinary branch banking statute, they are not within the zone of interests protected by Wisconsin's emergency branch banking statute.

Plaintiffs argue, however, that they have a clear interest in the determination of an emergency since they are injured by the illegal competition that results from an erroneous determination of an emergency. But, as discussed earlier in this opinion, competitive injury alone does not confer standing; the zone of interests test must also be met. The sound policy reasons for requiring satisfaction of the zone of interests test are particularly applicable to challenges based on statutes authorizing emergency action by administrative agencies.

The emergency provisions allow the Comptroller to act quickly to save a failing bank. Intervention by competing banks could only hamper this effort by causing delay and possibly needless exposure of the failing bank's condition. Such delay and exposure may alarm depositors of the failing bank and may undermine public confidence in the banking system as a whole. The determination that a bank is failing should involve only the failing bank, its depositors and shareholders, and the Comptroller. Competitor banks are strangers to the failure determination, even though their competitive interests might be affected by eventual Comptroller action. We agree with Professor Stewart's analysis:

Even in the strongest case for expansive standing where the agency acts in flat violation of the governing statute a stranger should not be permitted to challenge agency action.... The abstract concern for vindicating the bare words of statutes seems too attenuated a justification for disturbing mutually satisfactory arrangements struck by all of the relevant public and private interests. Accordingly, even in the case of plain statutory violations, we should view officials as bearing duties solely to the various interests which the legislature had recognized as entitled to consideration.

Stewart, Reformation of Administrative Law, 88 Harv.L.Rev. 1667, 1736 (1975). Thus, we conclude that the risk of an erroneous determination of an emergency, and subsequent approval of an illegal branch, does not justify allowing competing banks to disrupt the mechanisms for dealing with failing banks.

2

In Count II of their amended complaint, plaintiffs allege that even if an emergency existed at Midland, the Comptroller violated § 221.04(1)(j)2 by failing to offer to plaintiffs the opportunity to acquire Midland. But, as just discussed, plaintiffs are not within the geographical limitations of § 221.04(1)(j)1. Only those banks within the geographical limits of § 221.04(1) (j)1 are entitled to be offered the opportunity to purchase the failing bank and, consequently, have standing to contest the Comptroller's failure to offer them that opportunity. Therefore, plaintiffs lack standing to contest the failure to give them an offer.

In summary, we hold that plaintiffs do not have standing to assert the branch banking claims contained in Counts I and II of their amended complaint. Plaintiffs are not within the zone of interests sought to be protected by the relevant statutes. Therefore, the district court's dismissal of these claims is affirmed.

III

In addition to the branch banking claims, plaintiffs alleged in their original complaint that the Comptroller had violated the Bank Holding Company Act ("BHCA") by failing to obtain prior approval of the Midland acquisition from the Board of Governors of the Federal Reserve System ("Board"). Plaintiffs argued that the purchase of Midland by First Bank was, in reality, a purchase by First Bank System, a bank holding company and, consequently, required the approval of the Board. The district court dismissed this claim on the ground that it lacked jurisdiction.

In order to purchase a bank, a bank holding company must obtain Board approval. 12 U.S.C. § 1842(a). Pursuant to 12 U.S.C. § 1842(d)(1), the Board may approve a bank holding company's purchase of assets of a bank outside the state in which total deposits of the bank holding company's banking subsidiaries are largest only if acquisition of such assets of a bank by an out-of-state bank holding company is specifically authorized by the statute laws of the state in which the bank is located.*fn21 Plaintiffs argue that since (1) Minnesota is the state where the total deposits of First Bank System's banking subsidiaries are greatest and (2) Wisconsin statutes do not permit the acquisition of banks located in Wisconsin by bank holding companies outside of Wisconsin, First Bank System could not acquire Midland directly. Thus, the purported acquisition of Midland by First Bank was, plaintiffs argue, a sham perpetrated by First Bank System in order to evade the prohibitions of 12 U.S.C. § 1842(d).*fn22

Initially, we note that the restrictions in § 1842(d) do not, on their face, apply here. Pursuant to 12 U.S.C. § 1842(a)(4), prior Board approval is only necessary "for any bank holding company or subsidiary thereof, other than a bank, to acquire all or substantially all of the assets of a bank" (emphasis added).*fn23 Since the transaction at issue was a purchase of the assets of a bank (Midland) by another bank (First Bank), not by a bank holding company, under the literal language of the statute, no application for approval from the Board was required. See Leuthold v. Camp, 273 F. Supp. 695, 702 (D.Mont.1967), aff'd, 405 F.2d 499 (9th Cir. 1969); South Dakota v. Nat'l Bank of South Dakota, 335 F.2d 444, 448-49 (8th Cir. 1964), cert. denied, 379 U.S. 970, 85 S. Ct. 667, 13 L. Ed. 2d 562 (1965) ("The words in the statute "other than a bank' clearly show the intention of Congress not to require a bank acquiring the assets of another bank to obtain Board approval").

But, plaintiffs argue that regardless of the exception in 12 U.S.C. § 1842(a) (4) to the requirement of Board approval, the Comptroller should have recognized that he had no jurisdiction to approve the Midland purchase because First Bank System, not First Bank, was the true purchaser of Midland. In other words, plaintiffs argue that we should "pierce the corporate veil" in order to prevent defendants from subverting the Congressional purpose behind § 1842(d).

Defendants argue that the Comptroller does not have jurisdiction to determine whether the BHCA has been violated. They argue that any challenge to a transaction under the BHCA must be presented to the Board, whose decisions may be reviewed only in an appropriate court of appeals pursuant to 12 U.S.C. § 1848. Therefore, defendants conclude, and the district court agreed, that the district court lacks jurisdiction to decide the merits of plaintiffs' claim that the Midland acquisition was a BHCA violation. We agree. Plaintiffs may bring a BHCA claim only before the Board.*fn24 They may not present their BHCA claim in the guise of a challenge to the Comptroller's discretion and authority.

The leading case in this confusing area of allocation of authority between the Comptroller and the Board, with review in the district court or court of appeals respectively, is Whitney Nat'l Bank v. Bank of New Orleans, 379 U.S. 411, 85 S. Ct. 551, 13 L. Ed. 2d 386 (1965). In Whitney, a national bank in Louisiana wished to expand its operations through a new bank, but state branch banking law prohibited operation of a branch beyond its home parish. The bank attempted to solve its problem by organizing a bank holding company. The existing bank was to be merged into the holding company, which, in turn, would organize two banks, one consisting of the existing bank and the other consisting of the new bank in the neighboring parish. The net result was that the stockholders of the original bank would own the holding company, which in turn would own and operate both the original and new banks. The Board approved the plan over the objection of competing banks. The competitors sought judicial review of the Board's decision in the Fifth Circuit Court of Appeals, pursuant to 12 U.S.C. § 1848.

Meanwhile, after the Board's approval of the plan, but before the filing of the suit in the court of appeals for review of the Board's decision, the competing banks filed a declaratory judgment action in the District of Columbia District Court. The competitors sought a declaration that the Comptroller had no power to grant the necessary certificate of authority for the proposed new bank because the bank holding company arrangement violated the BHCA. In that suit, both the district court and the District of Columbia Circuit Court of Appeals held that the new bank would be an illegal branch of the original bank. Consequently, the Comptroller was enjoined from issuing the certificate of authority to the new bank. As a result, the Board's order was essentially overruled by the action against the Comptroller.

The Supreme Court reversed, holding that since the BHCA gives the Board exclusive jurisdiction to approve bank holding company arrangements,*fn25 review of Board action must be pursued solely as provided in the BHCA in the appropriate court of appeals. The Court, therefore, ordered the suit involving the Comptroller dismissed.*fn26 The Court held not only that judicial review of Board action is available only as provided in the BHCA, but also that when the legality of a bank holding company's action is involved, any challenge must be brought initially before the Board. In other words, when Congress set up an exclusive judicial review procedure for Board determinations under the BHCA, it also evinced an intent that the Board always be the initial judge of BHCA issues:

Here the Court of Appeals held that the relationship of Whitney-Jefferson to Whitney-New Orleans would be that of a branch bank notwithstanding the fact that they were organized under a bank holding company arrangement. The District Court found the proposal barred by Louisiana Act No. 275 of 1962. We believe that these are the very types of questions that Congress has committed to the Board, and we hold that the Board should make the determination of the plan's propriety in the first instance. The soundness of this conclusion is especially evident when it is remembered that the Board has played a vital role in the development of the national banking laws, a role which makes its views of particular benefit to the courts where ultimately the validity of the arrangement will be tested.

379 U.S. at 421, 85 S. Ct. at 558 (emphasis added).

Thus, if there really was a BHCA issue in this case, it could only be brought before the Board, not as a challenge to the Comptroller's authority to approve the transaction. To hold otherwise would allow a decision regarding the Comptroller's authority to force a particular interpretation of the BHCA on the Board without the issue being presented in the first instance to the Board.*fn27

IV

For the foregoing reasons we find that the district court correctly dismissed both plaintiffs' original and amended complaints. The district court's judgment, therefore, is

AFFIRMED.


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