The opinion of the court was delivered by: Moran, District Judge.
In counts 1 and 2 of the complaint the State charges that the
Federal Reserve Bank and Merchandise National Bank violated their
warranties of good title under the Uniform Commercial Code when
presenting the checks with forged endorsements for payment.
Ill.Rev.Stat., ch. 26, §§ 3-417(1)(a), 4-207(1)(a).*fn1 In count
3 the State charges Merchandise National Bank with violating an
express guarantee of the genuineness of the prior endorsements on
the checks. The State seeks the amount it paid on the checks,
prejudgment interest and costs.
The State argues that this court has subject matter
jurisdiction over the Federal Reserve Bank under 12 U.S.C. § 632,
which reads in pertinent part:
Notwithstanding any other provision of law, all suits
of a civil nature at common law or in equity to which
any Federal Reserve bank shall be a party shall be
deemed to arise under the laws of the United States,
and the district courts of the United States shall
have original jurisdiction of all such suits; and any
Federal Reserve bank which is a defendant in any such
suit may, at any time before the trial thereof,
remove such suit from a State court into the district
court of the United States for the proper district by
following the procedure for the removal of causes
otherwise provided by law. No attachment or execution
shall be issued against any Federal Reserve bank or
its property before final judgment in any suit,
action, or proceeding in any State, county,
municipal, or United States court.
We agree. The state also requests the court to exercise pendent
party jurisdiction over Merchandise National Bank. This we
decline to do.
Defendants' argument that this court lacks subject matter
jurisdiction over the claim against the Federal Reserve Bank can
be disposed of quickly. Their position is that § 632 only confers
jurisdiction over "civil" suits against or on behalf of federal
reserve banks. An action under the U.C.C. is not a "civil" action
they claim. Hence, the argument goes, this court has no subject
Section 632 applies, however, to "all suits of a civil nature"
to which a federal reserve bank is a party. Nothing in the U.C.C.
suggests that cases under it are not "civil in nature." The
U.C.C. was designed primarily to simplify, clarify and promote
the uniformity of commercial law. Ill.Rev.Stat., ch. 26, § 1-102.
The U.C.C. makes clear its intimate connection with the common
law in Section 1-103:
Unless displaced by the particular provisions of this
Act, the principles of law and equity, including the
law merchant and the law relative to capacity to
contract, principal and agent, estoppel, fraud,
misrepresentation, duress, coercion, mistake,
bankruptcy, or other validating or invalidating cause
shall supplement its provisions.
In addition, § 632 was designed to give federal courts
jurisdiction over actions involving federal reserve banks to the
same extent they had prior to the passage of section 12 of the
Act of February 13, 1925, c. 229, 43 Stat. 941 [now at 28 U.S.C. § 1349].
See pages 1264-1265 infra. During this earlier period
federal courts exercised jurisdiction over claims against federal
reserve banks much like the one at issue here. See Closter
National Bank v. Federal Reserve Bank of New York, 285 F. 138 (2d
The more difficult issue is whether this court has pendent
party jurisdiction over Merchandise National Bank. Pendent party
jurisdiction is the joinder of a party who is not otherwise
subject to federal jurisdiction. Pendent claim jurisdiction,
which is more common, is the joinder of a ...