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ILLINOIS EX REL. HARRIS v. BOARD OF GOVERNORS OF T

December 28, 1990

PEOPLE OF THE STATE OF ILLINOIS ex rel. WILLIAM C. HARRIS, COMMISSIONER OF BANKS AND TRUST COMPANIES OF THE STATE OF ILLINOIS, Plaintiffs
v.
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM AND FEDERAL RESERVE BANK OF CHICAGO, Defendants, and HOUSE COMMITTEE ON BANKING, FINANCE, AND URBAN AFFAIRS, Intervenor-Defendant



The opinion of the court was delivered by: DUFF

 BRIAN BARNETT DUFF, UNITED STATES DISTRICT JUDGE

 Congress, or, more specifically, the House Committee on Banking, Finance, and Urban Affairs (the Committee), is investigating its current procedures and regulations governing foreign banks doing business in the United States. The investigation was prompted, at least in part, by the disclosure of the fact that an American branch (located in Atlanta) of the Italian Banca Nazionale del Lavoro (BNL) had approved over three billion dollars in "secret and unauthorized loans" to Iraq. See Opening statement of Henry B. Gonzalez, Chairman, Committee on Banking, Finance and Urban Affairs, cited in House Memorandum in Support of House Motion to Dismiss and in Opposition to Plaintiffs' Motion for Preliminary Injunction at 3.

 As part of its investigation, the Committee requested and then subpoenaed various records from the Board of Governors of the Federal Reserve (Board). Among the records subpoenaed are records compiled by state agencies charged with conducting bank examinations. The Board is permitted, indeed required, to make arrangements with those state agencies to share the information gathered from those examinations. See 12 U.S.C. § 3105(b)(1) ("the Board shall, insofar as possible, use the reports of examinations made by . . . the appropriate State bank supervisory authority for the purposes of this subsection.")

 One of the states which has conducted examinations of BNL is Illinois, through the office of William C. Harris, the Commissioner of Banks and Trust Companies of the State of Illinois (the court will refer to the plaintiffs collectively as "Harris" or "Illinois"). Harris and the Board have an information-sharing agreement, memorialized in a document entitled "Agreement on Sharing Confidential Supervisory Information". That agreement provides, in part, that the Board will not disclose state information "to any other state, local, or federal agency, court or legislative body, or any other agency, instrumentality, entity, or person without the express written permission of the agency that provided the information."

 Harris believes that the agreement precludes disclosure by the Board to anyone, including the Committee. He therefore filed a motion for a temporary restraining order and preliminary injunction, seeking to prevent disclosure. This court granted a temporary restraining order in order to preserve the status quo, and to give this court an opportunity to consider the important and fascinating issues presented by this conflict.

 When the parties first came before the court, the court ordered them to preserve the status quo until it had an opportunity to rule on the motion for temporary restraining order. The next time the parties appeared before the court, the court held that the Committee "subpoena", issued after the House had adjourned sine die, was invalid. This court nonetheless allowed the Committee (or, more accurately, the Committee staff) to intervene, as the Committee staff, with or without the subpoena, had asserted a legitimate legislative interest in the documents. The court noted, however, that the interest was sharply limited by the fact that the House, which is not a continuing body, was not in session.

 Shortly thereafter, the court entered a temporary restraining order, and set an expedited briefing schedule for the preliminary injunction. The court did not schedule a hearing because the parties represented that the dispute presented a purely legal question, hence there was no need for a factual hearing. A multitude of briefs have now been filed (about which more later) and this court has considered them as well as the oral arguments of the parties, and in light of them, and its own interpretation of the relevant law, this court grants Harris' motion for a preliminary injunction.

 1. The Stakes

 This dispute has placed the court squarely in the center of a rare and portentous clash between two governmental entities, each asserting its own "sovereignty" or power over the matter in issue. The court is well aware of the need to tread carefully in its attempt to resolve a dispute of this dimension between two such entities. The court turns first to the questions of jurisdiction and justiciability.

 The case presents a "federal question", calling as it does for an interpretation of federal laws and possibly the Constitution; it involves a contract with the United States; and the plaintiff seeks "to compel an officer of the United States to perform [what the plaintiff alleges to be] his duty". Jurisdiction in this court is therefore proper pursuant to 28 U.S.C. §§ 1331, 1346 and 1361.

 As to justiciability, neither the Committee staff nor the Board has argued that this case presents a non-justiciable "political question", see Baker v. Carr, 369 U.S. 186, 208-211, 7 L. Ed. 2d 663, 82 S. Ct. 691 (1962), and so this court need not venture down that thorny path. See Robbins v. Lady Baltimore Foods, Inc., 868 F.2d 258, 262 (7th Cir. 1989), and cases cited therein ("it is well established that federal courts must not rule on constitutional issues where other, non-constitutional dispositive grounds are available.") The Committee staff, rather than argue that the question presented here is non-justiciable, merely asserts its right to success on the merits, *fn1" while the Board, appropriately as a "neutral stakeholder", has not argued for a particular outcome.

 The first question presented to this court, then, is whether the contract between Harris and the Board prohibits the Board from making Harris' documents available to the Committee staff. If so, then the issue is whether it is enforceable against an investigatory interest on the part of a federal legislative body, unaccompanied by a valid subpoena. If the contract does not prohibit disclosure of the documents in issue here, then this court must still decide whether the interest Harris has asserted in the documents overcomes the legislative interest described above.

 Before addressing the merits, however, this court is compelled to comment on two procedural matters. First, the court must voice its concern with the Committee staff's failure (at least seven times, by this court's count) to comply in letter or spirit with this court's rulings and with this district's local rules. The Committee counsel made his initial appearance in this court without having entered an appearance as required by Local Rule 3.14(b). Committee counsel proceeded to breach various other rules, including the rule requiring designation of local counsel, Rule 3.13, despite this court's repeated admonitions that compliance with the rules in general, and designation of local counsel in particular, was required. Rather than adhere to this court's admonitions, however, Committee counsel came into this court like an eight-hundred pound gorilla, expecting deference from the court while refusing to respect the court's orders and admonitions. *fn2" This court has warned the Committee staff, and does so again now, that it will not continue to tolerate such blatant disregard for its orders.

 Certainly the Committee staff must have known that the conflicting affidavits presented a question of fact which could not be resolved without a hearing. This court need not speculate, however, as to whether the Committee staff was attempting to delay the court's ruling in this matter until after the House reconvenes in early January (at which time the Committee could issue a valid subpoena), since the facts which have been put in issue are simply not material. The Board's interpretation of the contract it entered with Harris is informative to the court, but not dispositive. Ms. Polichene's understanding of the Board's interpretation of the contract and pertinent statutory provisions is both incompetent and irrelevant evidence. Accordingly, the court strikes those portions of Ms. Polichene's affidavit which contain legal argument, or which represent the contents of a conversation with Board General Counsel regarding the interpretation of the contract. The court also strikes the affidavit submitted by the Board in response to those portions of Ms. Polichene's affidavit.

 2. Interpretation of the Contract

 The contract is brief, and fairly straightforward. The parties have raised two issues in relation to it -- first, that it applies, on its face, to "bank holding companies and state member banks", not to branch offices of foreign banks. The second issue is the effect of 12 C.F.R. § 261.12 on the interpretation of the contract. This court will address each issue in turn.

 a. Whether the agreement covers the BNL documents

 Although the contract, on its face, does not apply to the BNL documents which Harris shared with the Board (BNL is neither a bank holding company nor a state member bank), in practice, the parties agree that the Board has applied the same confidentiality standards to documents regarding foreign banks as it has to the banks specifically covered by the contract. The ...


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