Petition — Board of Commissioners of the Mississippi State Bar v. Federal Land Bank of New Orleans

Supreme Court, U.

,D

SEP 10 1979

IN THE

1 MICHARL ROBAK, JR., @LERR

Supreme Court of the United States

OCTOBER TERM, 1979 .

* 79-401

BOARD OF COMMISSIONSERS

OF THE MISSISSIPPI STATE BAR,

Petitioner

VERSUS

THE FEDERAL LAND BANK OF NEW ORLEANS,

Respondent

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

LESLIE DARDEN

DARDEN, SUMMERS, CARTER &

TROUT, P.A.

Attorneys for Board of

Bar Commissioners

P.O. Box 6

New Albany, MS 38652

601-534-6326

INDEX

Page

Ne dics suc eecccces ]

NE ESS l

Questions Presented for Review ........ | ae 2

Statutes and Federal Regulations Involved ................ 3

ES 3

Ne een cc aumeccccccceae 3

ee I I, UO sik sk se aeecec 4

es dc cn ec ec ee cece 4

2. Bank Organization and Operations ............ 5

3. System of Approving Attorneys .............. 8

4. Present Method for Listing Attorneys ......... 9

Reasons for Granting the Writ ....................000. 12

BEER RE GEA SE ae 15

APPENDIX

A. Opinion of Circuit Court of Appeals ............... 16

I ne ee 28

C. Order of Circuit Court of Appeals ................. 40

D. Pertinent Text of Statutes Involved ................ 42

E. Pertinent Text of Regulations Involved ............. 46

ob

CASES CITED

Page

Bates and Guild v. Paynex, 194 U.S.106 ................ 15

California v. Federal Power Commission

PER TPMT ioainw ec 8% Con Ceh sneNe ON ae tae) 13

Eastern RR Conf. v. Noerr Motor Freight

PE MSO SULT b> 5-2 Skea TEA Vn Hare 13

Goldfarb v. Virginia State Bar 421 U.S.773.............. 12

Louisville Joint Stock Land Bank v. Rodford

MPP EEO. 5 bo eo) See es 50S Walls oS Cae ke be ce 13

Schware v. Board of Bar Examiners 353 U.S.232 ......... 14

US Dept. of Agriculture v. Moreno 413 US. 528 .......... 13

STATUTES AND REGULATIONS CITED

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-ii-

STATUTES AND REGULATIONS CITED (Continued)

Page

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12 Code of Federal Regulations

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IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM 1979

BOARD OF COMMISSIONERS

OF THE MISSISSIPPI STATE BAR,

Petitioner

VERSUS

THE FEDERAL LAND BANK OF NEW ORLEANS,

Respondent

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Petitioner prays that a writ of certiorari issue to review the

judgment of the United States Court of Appeals for the Fifth

Circuit entered on July 20, 1979.

OPINIONS BELOW

The opinion of the District Court for the Northern District

of Mississippi is printed in Appendix A hereto and the opinion

of the Court of Appeals for the Fifth Circuit is printed in

Appendix B hereto.

JURISDICTION

The judgment of the Court of Appeals for the Fifth Circuit

was made and entered on July 20, 1971. A copy thereof is

attached to this petition as Appendix C. The jurisdiction of

this Court is invoked under 28 U.S.C. 1254 (1).

QUESTIONS PRESENTED FOR REVIEW

In September 1974 the Federal Land Bank of New Orleans,

w.thout notice to borrowers or attomeys, arbitrarily and

capriciously abandoned its longstanding system of an essentially

open list of approved attorneys. Previously, borrowers selected

attorneys for title opinion and loan closing from an approved

list that was open to experienced attorneys. The Bank, acting

in conjunction with the local land bank associations, without

any objective standards, struck 70% of attorneys or firms from

its list and refused to establish any uniform system for ad-

mitting additional attorneys.

The District Court held that the Federal Land Bank of New

Orleans is, in essence, a private institution and as such acts as

it pleases in regard to which attorneys may and may not be

employed by its borrowers for the purpose of closing Federal

Land Bank loans.

The Court of Appeals did not decide the question of whether

or not the Federal Land Bank is a federal agency or a private

institution, but held that in either event the arbitrary selection

of the attorneys to be used by borrowers for the purpose of

certifying title and closing loans was proper. The questions

presented are:

1. Is the Federal Land Bank of New Orleans a federal

agency, subject to the due process provisions of the Constitu-

tion, and the intent of the provisions of the Administrative

Procedure Act?

2. Does the Bank have the right to arbitrarily name and

limit the number of qualified attorneys who may close inter-

state real estate loans made by it to those borrowers qualified

by federal statute to borrow from the Bank?

3. May the Bank knowingly dampen competition by

arbitrarily limiting the number of qualified attorneys borrowers

may select for the closing of interstate real estate loans?

4. Should the Bank be required to establish reasonable,

objective standards for the inclusion of attorneys upon its list

of “approved attorneys” for the closing of loans?

STATUTES AND CODE OF FEDERAL REGULATIONS

INVOLVED

5 U.S.C.§ 500 (b)

12 U.S.C.§ 2002

§ 2011

§ 2013 (a) (b) (d)

§ 2014

§ 2016

§ 2017

§ 2223 (a)

§ 2227 (a) (1)

§ 2241

§ 2242 (a)

12 Code of Federal Regulations § 614.4230

§ 615.4300

§ 615.5060

STATEMENT OF THE CASE

(a) Course of Proceedings and Disposition in the Court Below

John Sibley, a member of the Bar of Mississippi, filed suit

in the U.S. District Court for the Northern District of Missis-

sippi, praying for injunctive relief and damages because of the

action of the Federal Land Bank of New Orleans in striking

him from the list of attorneys authorized to close loans for

borrowers from that institution. He also asked that the mem-

bers of the Bar of Mississippi be included in the action as a

class.

Subsequently, the Board of Commissioners of the Mississippi

State Bar filed a petition to intervene on behalf of the members

of the Mississippi State Bar. Intervention was permitted and

thereupon Sibley’s original complaint was amended to eliminate

the request for class determination and certain claims for

damages for defamation. The Bar Commissioners asked for in-

junctive relief to require the Federal Land Bank to set up ob-

jectives, reasonable standards for admission of qualified attor-

neys to its “list of attorneys” authorized to close loans for the

borrowers who are required to select an attorney from the list

and pay the attorney’s fee.

On completion of discovery, interrogatories and depositions

and the filing of certain affidavits, the parties moved for sum-

mary judgment and agreed to submit the matter upon the

record as it then existed.

The District Court denied the relief requested by both

Sibley and the Commissioners, and held that the Bank was

a federally chartered private institution and that it could

arbitrarily limit the number and identity of the attorneys

whom the borrowers might select and must pay to close their

loans, and that this action was not violative of either due

process, the Administrative Procedure Act or the Sherman

Act. Summary Judgment dismissing the complaints of Sibley

and the Bar Commissioners was entered. The Court of Appeals

of the Fifth Circuit affirmed.

(b) Statement of Facts.

1. Position of the parties.

The Federal Land Bank of New Orleans (The Bank) main-

tains it is « privately owned institution, federally chartered;

that it can act arbitrarily and without any objective standards

in selecting a limited number of attorneys to handle title

certification and closings of real estate loans. Futher, that its

actions in this regard are proper, although competition is

admittedly dampened, and the legal services its borrowers

must pay for may be more expensive than if a larger nember

of admittedly qualified attorneys were available to the bor-

rowing farmer and rancher. The Petitioners feel that this federal

instrumentality should be required to accept the title certifi-

cate and legal work performed by any Mississippi lawyer meet-

ing reasonable, objective standards, selected by the borrower

and adequately performing the necessary legal work involved

in closing the loan. The Petitioners urge that the failure of the

Bank to do so admittedly results in decreased competition in

the handling of interstate loan closings, increases the cost of

legal services, denies the prospective borrower the fundanemtal

and tranditional right of having his business handled by an

attorney of his choice and eyen of using an attorney already

familiar with his title. It also denies to the qualified attorney

not on the approved list the right to practice his profession.

2. The organization of the Bank and its operations.

The District Court analogized the Bank to federal savings and

loan associations or national banks that are privately owned and

capitalized. The purpose and history of the Federal Land Banks

do not bear this out. In 1929, the Federal Reserve Bank bought

$9,500,000 in land bank bonds; between 1934-1936, Federal

Farm Mortgage subscribed $200,000,000 land bank bonds.

Between 1932 and 1937 Congress appropriated $189,000,000

which was repaid by 1947. The land banks are still eligible for

direct federal loans.

The Federal Land Bank of New Orleans is one of twelve

such banks, established pursuant to the Federal Farm Loan

Act of 1916, and continued in existence by the terms of the

Farm Credit Act of 1971, (the Act), 12 U.S.C. 2011, et seq.,

the basic law now governing its existence and operation.

That same Act, also continued in existence the federal land

bank associations, of which there are 34 in the New Orleans

Bank’s area of operations (Mississippi, Louisiana and Alabama),

ra

12 of which are in Mississippi.

The Bank and the associations are part of a comprehensive

farm credit system which also includes the Banks for Coopera-

tives and the Federal Intermediate Credit Banks and the Produc-

tion Credit Associations, all under the supervision of the Farm

Credit Administration. 12 U.S.C. 2002.

The Farm Credit Administration is an independent agency

of the executive branch of the federal government, 12 U.S.C.

2241. The Farm Credit Board establishes the general policy for

the operation of the Administration of the component banks

and associations comprising the system. One member of this

Board is appointed by the Secretary of Agriculture and one

from each of the 12 farm credit districts by the President, with

the advice and consent of the Senate, 12 U.S.C. 2242 (a).

The function of the land banks is to make long term rural

real estate loans, secured by first mortgages, and this is done

through the land bank associations in the area of the real estate

offered as security, and which require borrowers to take stock

in the association handling the loan. The association, in turn,

takes voting stock in the federal land bank of its district.

Non-voting stock may be held by the Governor of the Farm

Credit Administration and the associations. 12 U.S.C. 2013

(a) (b).

Participation certificates may be issued to the non-farmers

Or non-ranchers who are eligible to borrow, who are rural

homeowners, and agricultural facilities, such as processing

plants. 12 U.S.C. 2013 (d).

There is a District Farm Credit Board of seven mes:bers

from the credit district which is coterminous with the Bank’s

district. Two are elected by the land bank associations, two

by the production credit associations, and two by the borrowers

or guaranty fund subscribers of the Bank for Cooperatives.

The seventh is appointed by the Governor of the Farm Credit

alin

» Administration. 12 U.S.C. 2223 (a).

This district board constitutes the Board of Directors of

the federal land bank of the district, 12 U.S.C. 2227 (a) (1),

so it is seen that only two of the seven members represent

the land bank associations in the district, while four come from

other federal instrumentalities and one is the appointee of the

Governor of an independent federal agency.

Those eligible to borrow from federal land banks, unlike

national banks or federal savings and loan institutions, are

strictly limited by statute to bona fide farmers and ranchers,

those furnishing farm related services, and owners of rural

homes. 12 U.S.C. 2016.

“he basic method of making Federal Land Bank of New

Urleans loans is for the prospective borrower to apply to the

land bank association of his area, paying an application and

appraisal fee to the association of his area, which appraises

the property offered as collateral and otherwise investigates

the credit and, if it is favorable, approves the loan.

The borrower must then choose from a limited list of attor-

neys, now arbitrarily selected by the Bank. The attorney

prepares the loar documents which are ordinarily printed forms

furnished by the Bank, and certifies the title to the real estate

offered as security and the fact that the security instrument

in favor of the Bank constitutes a first lien. The association

then prepares certain closing statements and issues a draft to

the borrower on the Bank, drawn through a commercial bank

in New Orleans. The borrower pays all closing expenses, in-

cluding the attorney’s fee. The attorney is paid directly by the

borrower. The Bank pays the attorney nothing.

The requirement of the Act as to security provides simply

for “first liens on interest in real estate,” 12 U.SC. 2017.

There is no reference in the Act as to how the existence of such

first liens is to be established.

Chapter 6 of Title 12 of the Code of Federal Regulations

contains regulations promulgated for the operations of the

federal land banks. Section 614.4230 requires that primary

security shall consist of a first lien on interest in real estate.

Section 615.5060 contains the sole reference to the method

by which this is done, so as to make the loan eligible for per-

manent inclusion in the collateral pool supporting the land

bank bonds, in this language:

‘““. . . an attorney has certified that the interest of the

bank in the primary real estate security for [the] ioan

is a first lien on the borrower's interest or its equivalent

from a security standpoint.”

There is no other reference or requirement in the regulations

as to the certification of the first lien and no other reference

to an “attorney,” or any definition or restriction of that work.

Any licensed Mississippi attorney can give a title certificate

that would meet the requirements of the law and the regula-

tions.

There is no current minute entry upon the minutes of the

Board of Directors of the Bank or of its executive Committee

setting up a system of selecting attorneys to handle loan clos-

ings for its borrowers, nor approving the arbitrary system of

selection of attorneys to be put upon the “approved list of

closing attorneys” that has been put into effect by the officers

of the bank.

3. The Bank’s systzm of approving closing attorneys prior

to October 1973.

In order to handle the local legal work involved in the closing

of loans, the Bank, in the late 20’s and the 30’s had a system

of accepting abstracts of title from lawyers in Mississippi

-8-

communities - or at least those not served by title abstract

plants — which were examined by Bank personnel and, if title

was found to be good, the Bank staff attorney approved the

title. Subsequently, that system was changed so that Mississippi

lawyers in good standing, who had as much as ten years’

experience in title matters, were permitted, on application, to

be listed on an approved list of attorneys that borrowers might

employ to examine the records and certify the title to the

real estate offered as security, without the necessity of submit-

ting an abstract.

4. The Bank’s present method for listing attorneys.

In October 1973 a bulletin was issued to the associations

and Bank field personnel advising that a moratorium on ap-

proving attorneys had been put in effect. Whether or not any

Mississippi attorneys were, in fact, put on the approved list

by the Bank between that date and September 16, 1974, is

not clear from the record but, on the latter date, Mr. Brian

Babin, as General Counsel for the Bank, wrote a letter to

approximately 70% of the lawyers and firms on the approved

list in Mississippi, stating that they were no longer approved to

close land bank loans. Mr. Babin stated that the decision as to

who to retain and who to drop was his responsibility and he

had made the decision.

In a letter to the attorneys and firms retained, also dated

September 16, 1974, Mr. Babin stated, in part:

“Arbitrary decisions have been made in some instances

prompted by our desire to reduce the overall number

of attorneys involved.”

And further stated:

“Since fewer attorneys are approved now to close

loans than in the past, it is expectable (sic) that you

4.

will be handling more loans.”

Mr. Babin could give no instance where the decision to drop a

name from the approved list was not arbitrary.

On September 12, 1974, Bulletin 466 had been issued by the

Bank to the associations, advising them there would be few

anticipated changes in the list in the future.

There was no prior consultation with attorneys dropped from

the approved list in September 1974 and no consultation with

any bar group or association.

Within the memory of the chief legal officer of the bank - -

Mr. Babin - - whose title has now changed from that of Chief

Counsel, there have never been any problems with the certi-

fication of title by Mississippi attorneys. He states that many,

if not, in fact, all firms and lawyers dropped from the approved

list are qualified attorneys who can properly handle the legal

aspects of closing Bank Loans. The only criteria he has stated

he used in making the selection was:

“We told the associations to consider the attorneys

they had been dealing with and consider attorneys

whom they would like to work with to handle the

whole backwall, as we call it, the entire loan trans-

actions, then to consider the mearis of reducing the

number...”

again,

“We didn’t say or had no personal awareness for that

matter of the relative professional competence of one

firm over another firm or others . . .what we are talking

about is numerous firms many of which with relatively

similar professional qualifications with some being

retained and some not apparently because of the desire

to have fewer people involved in the process. . .”

-10-

The Bank recognizes the obvious fact that the reduction of

the list of approved, competent attorneys whose certificates will

be accepted by the Bank results in a dampening of competition

among those the borrowers may select, and must pay, to handle

their Bank loans, though Mr. Babin states in reference to com-

petition in fees:

“ . I found some attorneys don’t like the word

competition because they don’t feel the necessity to

be competitive. But we don’t know where anyone

stands with attorney’s fees... .”

“All attorneys are paid by the borrower... .”

“We don’t really look into it [the fee] to any great

extent.”

There is now no way for any attorney to come onto the ap-

proved list unless there is a lack of an attorney in a community

due to death, disbarment, suspension from practice, or other

cause that results in having no available attorney for the bor-

rower to employ, in which event the Bank will select another

attorney by the same arbitrary method.

The fact that a competent, unlisted attorney may already

have done title work on the property offered as security, re-

sulting in the necessity of the borrower paying for the same

work twice, is recognized as a fact by the Bank but did not

enter into the selection process, and had no effect on the re-

tention or dropping of attorneys, or the refusal to open the list

for additional attorneys to be approved.

In addition to the fact there has never been any instance in

the past seven years, at least, when any question arose as to

the professional competence of any attorney handling Bank

loan closings, there also are no records, documents or statis-

tics which support the selection of one attorney over another

on the basis of administrative handling, cooperation with Bank

or association personnel or other basis of selection.

ah.

The Bank refuses to put into effect any procedure that would

set up objective standards for the approval of attorneys to be

placed on the list of those authorized to close loans for its

borrowers, but maintains that it has the absolute right to choose

any attorney it desires to list or drop, and neither the public,

the Bar, its prospective borrowers, nor anyone else, has the

night to question its authority to do so arbitrarily and capri-

ciously .

REASONS FOR GRANTING THE WRIT

The court of appeals has decided an important question of

federal law in a way in conflict with the decisions of this court

in regard to due process, the dampening of competition among

lawyers in handling interstate real estate loans and the intent

of the provisions of 5 U.S.C 500 (b) in regard to representation

of persons dealing with federal agencies.

This case presents an important question of federal law

which should be, but has not been settled by this court.

The Board of Commissioners of the Mississippi State Bar is

statutorily constituted and has the duty to see that the public

has access to lawyers for the performance of necessary legal

services free from arbitrary and unreasonable restrictions on

availability.

Goldfarb v. Virginia State Bar, 421 U.S. 773, settles the

fact that when interstate real estate transactions are involved,

the artificial limitation of free and competitive access to legal

services is a restraint upon commerce proscribed by the Sher-

man Act.

Where a government agency goes into the financial market-

place and freely and openly competes with private enterprise

in the making of interstate loans, its activities in dampening

competition are as effective in damaging the eligible borrower

a}?

as would be the activity of any other person.

The Farm Credit Act does not specifically provide for any

method of obtaining an attorney's opinion of title. There is

nothing which specifically authorizes either a disregard of the

express provision of the Sherman Act, nor directs a course of

conduct contrary to the terms and the spirit of that Act.

Section 1 of the Sherman Act contains no exception, and there

is heavy presumption against implicit exemption, California v.

Federal Power Commission, 369 U.S. 482.

The decision in Eastern RR Conf. v. Noerr Motor Freight,

365 U.S. 127, restates the rule that valid government action

does not constitute a violation of the Sherman Act, but the

opinion is careful to use the word “‘valid.”

The action of the Bank here contravenes the due process,

and the included equal protection provisions, of the Fifth

Amendment. Due process is denied not only the excluded

attorneys, but the borrower who is, by the arbitrary actions of

the Bank denied free access to a competitive marketing of legal

services.

The powers of government are subject to due process. Louis-

ville Joint Stock Land Bank v. Rodford, 295 U.S. 555. Al-

though the Fifth Amendment does not use the term “equal

protection of the laws,” it is well recognized that due process

encompasses, in large measure, the elements of equal protec-

tion. U.S. Department of Agriculture v. Moreno, 413 USS.

528, in which the court set up the “Rational Relationship”

of whether a classification is in conformity with due process

requirements.

The classification of lawyers retained on the approved

attorney list by the Bank was done on the instruction of the

Counsel of the Bank to the associations to select lawyers

already on the iist they would like to work with. He and the

Senior Attorney for the states involved went over and some-

-]3-

times expanded the list. He says the decisions were “tin some

instances arbitrary.” It is admitted no rational or objective

standard for the selection was established and no consideration

of experience, demonstrated ability or performance was used.

The Bank merely selected the lawyers the associations said

they would like to work with and arbitrarily struck off others

to reduce the list by 70% - - the most invidious discrimination

imagine "»le.

The arbitrary action was recognized by Mr. Babin as having

the effect of lessening competition. He wrote the lawyers

retained:

“Since fewer attorneys are approved now to close

loans than in the past, it is expectable that you will

be handling more loans,”

The prospective borrower was denied due process by the

arbitrary action of the Bank in the limitation on available

services. This is particularly true where a competent real estate

lawyer is already familiar with a title, but the borrower is

forced to hire another who must, at the cost of the landowner,

duplicate the title work already done.

The attorney stricken from or denied admission to the list

of closing attorneys available to borrowers, it obviously invi-

diously discriminated against by the arbitrary action of the

Bank. The right to practice law is a right protected by the due

process provisions of the Constitution. Schware v. Board of

Bar Examiners, 353 U.S. 232.

The policy of the United States in regard to free access to

legal services by the public is expressed in 5 U.S.C. 500(b)

as follows:

“An individual who is a member in good standing of

the board of the highest court of a state may represent

-14-

a person before an agency on filing with the agency a

written declaration that he is currently qualified as

provided by this subsection and is authorized to rep-

resent the particular person in whose behalf he acts.”’

The Court may set aside or enjoin action by a federal agency

which is arbitrary or an abuse of discretion. Bates and Guild Co.

v. Paynex, 194 U.S. 106.

CONCLUSION

This Court should grant certiorari and consider the question

of arbitrary denial of due process and dampening of competi-

tion involved.

Respectfully submitted,

Leslie Darden

Darden, Summers, Carter

& Trout, P.A.

Attorneys for Board of Bar

Commissioners

P.O. Box 6

New Albany,MS 38652

601-534-6326

-15-

APPENDIX A

John F. SIBLEY, Plaintiff-Appellant,

v.

The FEDERAL LAND BANK OF

NEW ORLEANS,

Defendant-Appellee,

and

Board of Commissioners of the

Mississippi State Bar,

Intervenor-Appellant.

No. 77-1817.

United States Court of Appeals,

Fifth Circuit.

June 20, 1979.

** *

Appeals from the United States District Court for the North-

ern District of Mississippi.

Before TUTTLE, TJOFLAT and HILL, Circuit Judges.

TUTTLE, Circuit Judge:

The Federal Land Bank of New Orleans (‘‘Bank’’) reduced

by approximately seventy percent the number of Mississippi

attorneys on its list of attorneys approved to conduct loan

closings for the Bank. The appellants, an individual attorney

and the Commissioners of the Mississippi State Bar, brought

this action seeking to enjoin the Bank from cutting down its

list. The district court granted summary judgment in favor of

the Bank, and we affirm.

I.

The Federal Land Bank of New Orleans is one of twelve such

banks chartered by the United States pursuant to the Federal

Aé.

Farm Loan Act of 1916, 39 Stat. 360 (1917), and continued

under the Farm Credit Act of 1971, 12 U.S.C. § 2001 et seq.

The Bank is part of the nation’s Farm Credit System, which

includes the federal land bank associations, the federal inter-

mediate credit banks, the production credit associations, and

the banks for cooperatives, all under the supervision of the

Farm Credit Administration. 12 U.S.C. § 2002; see generally

12 C.F:R. ch. VI.

The role of the federal land banks in this system is to make

rural real estate loans primarily to farmers and ranchers. This

they do through the federal land bank associations, of which

there are 34 chartered by the Federal Land Bank of New

Orleans. The associations own all the voting stock of the

Bank;l/ each subscribes to stock in the Bank in proportion

to the amount of the aggregate loans held or applied for by

members of the association. 12 U.S.C. § 2013. In turn, when

a bank makes a loan to a farmer or rancher, the loan appli-

cant subscribes to stock in the association in an amount be-

tween five and ten percent of the full amount of the loan, the

exact percentage determined by the Bank. 12 U.S.C. § 2034.

All the funds loaned by the Bank come from its own opera-

tions. The Bank lends no government funds and receives no

government guarantees of its loans or its obligations. 2/ The

Bank is governed by a seven person board of directors, two

elected by land bank associations, another four elected by

other entities in the farm credit system, and a seventh ap-

1/ The Governor of the Farm Credit Administration may hold non-

voting stock in the banks. 12 U.S.C. § 2013 (d).

2/ During the Great Depression, the federal government did play a role

in the financing of the federal land banks. The Federal Reserve Bank

bought $95.5 million in land bank bonds in 1929, and the federal farm

Mortgage Association bought $200 million in land bank bonds between

1934 and 1936. From 1932 to 1937, Congress appropriated direct loans

for the bank.

a

pointed by the Governor of the Farm Credit Administration.

12 U.S.C. § 2223 (a).

The Bank’s loans for rural real estate are very specifically

limited to adequately secured first mortgages. 12 U.S.C. § 2017

requires that “[{I]oans shall not exceed 85 per centum of the

appraised value of the real estate security, and shall be secured

by first liens on interest in real estate of such classes as may be

approved by the Farm Credit Administration.” Accord 12

C.F.R. § 600.20 (1977), 614.4230 (1977). 3/ The statutes

and regulations governing the Bank leave to the Bank the

methods for ascertaining that its loans meet these requirements.

Nevertheless, they make clear that the responsibility to do so

is the Bank’s 12 C.F.R. § 615.5060 (a) (1977) provides:

If the chief counsel for a Federal Land Bank bas determined

in writing that bank procedures provide sufficient safeguards

to assure that a loan made by the bank will be secured by a

first lien or its equivalent on interest in the primary real estate

security, an attorney lien certification need not be obtained

3/ 12C.F.R. § 600.20 states in part:

The principal function of the Federal land bank is to make first mort-

gage loans to eligible applicants.

12 C.F.R. § 614.4230(a) states in full:

Primary security for a Federal land bank shall consist of a first lien on

interest in real estate. In the case of nonfarm rural home loans, the pri-

mary security shall be a first lien on the rural residence being financed.

The real estate interest must be mortgageable interest under deeds or

leases which reasonably may be considered adequate to afford the security

of a first lien upon the rights and interest on which the loan is predicated.

Collateral closely aligned with, an integral part of, and normally sold with

real estate may be included in the appraised value of the security upon

which a loan is based. Appraised value shall be determined within ap-

proved standards and shall include in the evaluation either farmlands,

eligible farm-related businesses, or eligible rural residences, whichever

is appropriate for the type of loan being made.

-18-

at the time a note is accepted for collateral. The note shall

be withdrawn from collateral upon the expiration of one year

from the date of loan closing, unless before the end of such

period, an attorney has certified that the interest of the bank

in the primary real estate security for that loan is a first lien

on the borrower’s interest or its equivalent from a security

standing point.

thus, the Bank may either accept an attorney’s lien certification

or it may rely on its own precedure to fulfil its obligations to

loan only on the security of a first lien.

For more than 50 years, the Bank has used outside attorneys

to determine whether its interest in a real estate security meets

this obligation. During this time, the Bank has maintained a

list of attorneys approved to examine and certify title, record

instruments, and close loans. The final selection of an attorney

from this list for each transaction is made by the loan appli-

cant. The applicant pays the attorney’s fee. Originally, the

list was selected according to various indicia of reputation,

such as the Martindale-Hubbell directory, experience in ti-

tle examination, and recommendations of Bank Personnel and

other practitioners.

The list grew over the years so that by 1974 the Bank’s list

in Alabama, Mississippi and Louisiana contained more than

1400 law firms and an estimated 3,000 to 3,500 attorneys.

In Mississippi, there were 556 firms on the list. From 1922

through 1946, attorneys selected from this list would submit

abstracts of title which were then reviewed and approved

by the Bank’s own in-house attorneys, with the outside counsel

handling the rest of the closing. Beginning in 1946, the approv-

ed outside attorney would submit a certificate of title rather

than an abstract. At the time of the changes at issue here,

then, the procedure for obtaining a loan from the Bank was

as follows. A prospective borrower would apply to the land

bank association in his area, paying to the association fees for

the appraisal of his real estate security and the investigation of

-19-

his credit. The applicant would then choose from the Bank’s

approved list an attorney who would prepare the loan docu-

ments, ordinarily printed forms furnished by the Bank, conduct

the search, and certify the borrower’s title to the real estate

security and the first lien status of the Bank’s mortgage. Upon

such certification, the association would prepare closing state-

ments and issue a draft on the bank. The borrower would pay

all closing expenses, as well as the fee charged by the approved

attorney.

In 1974, the management of the Bank became concerned

about the lapse of time between an application for a loan and

the closing of a loan. 4/ In an effort to make more efficient the

processing of applications, the Bank instituted a new loan

closing procedure. This procedure contemplated ‘less involve-

ment by the Bank itself and greater involvement by the land

bank associations and local attorneys. As part of this new pro-

cedure, the Bank decided to reduce by 70 percent the number

of attorneys approved to handle closings. To carry out this

decision, the Bank’s duly authorized general counsel solicited

from the land bank associations under the Bank their views on

the attorneys who should remain on the list. Criteria suggested

to the association were admittedly subjective. They included

the volume of Bank business which attorneys handled, the

efficiency with which they handled it, their professional repu-

tations and competence in title practice, as well as association

personnel’s own preferences. The general counsel made the final

decision as to who should remain on the list.

On September 16, 1974, letters went out both to those

attorneys who remained on the approved list and to those

who were being dropped, informing them of the new procedure,

4/ A statistical study furnished by the Farm Credit Administration in-

dicated that Bank’s average of 82 days to close a loan ranked 9th among

the 12 federal land banks. The fastest bank averaged 54 days.

-20-

explaining the use for it, and telling them their status. The

letters acknowledged that many qualified attormmeys were

being dropped from the approved list; the letter to the attor-

neys who remained on the list stated “‘[m] any of the firms re-

moved from the list are prestigious and composed of highly

competent and reputable attorneys. Arbitrary decisions have

been made in some instances prompted by our desire to reduce

the overall numbers of attorneys involved.” As the district court

found nothing said in these letters was detrimental to the

attorneys dropped from the list. A subsequent letter to the

dropped attorneys to “clarify and amplify” the September 16

letter explained more extensively the new procedure. Under the

new system, “imputs by, and involvement of, the Bank will

be reduced to a minimum [and] [I] oan closing will be handled

almost exclusively by association personnel and approved

closing attorneys.” The second letter also stressed that the

decision to drop certain firms and attorneys was not intended

as any reflection on those dropped.

Appellant John Sibley was one of the attorneys dropped

from the approved list. He filed this action individually and on

behalf of all practicing attorneys in Mississippi. Subsequently,

the Mississippi State Bar (“‘Bar”) was permitted to intervene

on behalf of all Mississippi attorneys, >/ and Sibley amended

his complaint to seek only individual relief. The appellants

alleged that the Federal Land Bank of New Orleans is a federal

instrumentality subject to the due process clause, and that the

Bank violated the equal protection component of the due

process clause, cf. Bolling v. Sharpe, 347 U.S. 497, 499, 74

S.Ct. 693, 98 L.Ed. 884 (1954), by not accepting loan closing

5/ The Mississippi Bar is created by statute, Miss. Code Ann. § 73-3-101

(1972), and all Mississippi residents admitted to practice are required to

be members, Miss. Code Ann. § 73-3-103 (1972).

a.

services of any Mississippi attorney selected by the borrower.

In the alternative, assuming the Bank is not a federal instrumen-

tality with respect to its decision to cut the approved list, they

claimed that the action restricted competition among Missis-

sippi attorneys and thus violated the Sherman Act, 15 U.S.C.

§ 1. After discovery, the parties stipulated that there were

no material issues of fact and filed opposing motions for sum-

mary judgment. The district court granted summary judgment

in favor of the Bank.

Much of the argument on appeal focuses on the question

whether the Bank is a federal instrumentality for the pur-

poses of its decision to cut the list of approved attorneys. On

this issue depend the questions whether the Bank is subject to

constitutional requirements on one hand, or to the Sherman

Act on the other hand. It our view, the crucial issue on this

record is whether the attorney selected by the borrower from

the Bank’s approved list to certify title and conduct closing

represents the borrower or the Bank. Because we agree with the

district court that this attorney represents the Bank, we need

not decide whether the Bank is a federal agency. The Bank’s

selection of its own attorneys implicates neither the Consti-

tution nor the Sherman Act. —

A

Analysis of the role played by the outside attomey who

handles the loan closing indicates that the attorney’s primary

duty is to the Bank. By the terms of its statutory and regula-

tory mandate, “[t]he principal function of the Federal land

Bank is to make first mortgage loans on farm lands... .”

12 C.F.R. § 600.20 (1978). It meets this function by lending

only where its security is a first lien. To ascertain that its

security meets this requirement, the Bank relies on the

attorney who certifies title. This reliance on the attorney’s

22.

exercise of professional judgment and discretion is the essence

of a lawyer-client relationship. The Bank’s present-day reliance

on the outside attorney contrasts with its pre- 1946 system of

certifying title. There, in-house attorneys of the Bank examined

abstracts of title furnished by the outside attorney; it was

house counsel’s judgment which saw to the Bank’s legal! obliga-

tion. The new loan closing procedure which led to the reduction

of the approved attorneys list apparently envisioned even

greater reliance on the outside attorney’s judgment.

The closing attorney also performs other services for the

Bank besides certifying the title: title examination, recorda-

tion of the mortgage instruments, and preparation of notes.

deeds, financing statements, security agreements, and loan

agreements. To be sure, these services also provide a benefit

to the borrower. And it is the borrower who makes the final

selection of an attornéy and pays for his services. Nevertheless.

it is the reliance on the attorney to fulfil the Bank’s legal ob-

ligation to take only first liens which distinguishes between

services which otherwise benefit the bank and the borrower

equally. That the Bank makes only a partial choice of its

attorney does not alter that the choice belongs to the Bank.

Payment for the attorney’s services, the district court found,

merely represents an allocation of the costs of the loan. The

borrower remains free to hire an attorney to represent his own

interests in processing the loan application. 6/

- 6/ Perhaps one of the attractions of inclusion on the Bank’s list is that

it affords the prospect of doing collateral work for the borrower, such as

removing clouds on title to make the security eligible for a Bank mort-

gage. This prospect raises serious ethical problems, however. “The same

lawyer can offer different parties title protection, but if he attempts to

advise and represent them conflicts of interest arise.” The Proper Role

of the Lawyer in Residential Real Estate Transactions: A Report by

the Committee on Residential Real Estate Transactions of the ABA

19 (1944). Thus, the attorney who conducts the closing can only be

viewed as representing one party to the transaction. In this case, title

protection is a special function for the lender, and so the lender is best

viewed as that party.

33.

Our view of the attorney-client relationship in the processing

of federal land bank loans accords with the prevailing view of

the lawyer’s responsibility When selected by a borrower from

a list approved by the lender. Florida Bar v. Teitelman, 261

So.2d 140 (Fla. 1972); Wittenbrock v. Parker 102 Cal. 93,

36 P. 374 (1894); The Proper Role of the Lawyer in Residential

Real Estate Transactions: A Report by the Committee on

Residential Real Estate Transactions of the ABA (1944);

Op. 98, State Bar of Michigan Committee on Professional &

Judicial Ethics (1946) -2/

Federal Land Bank of New Orleans v. Henderson, Black &

Merrill Co., 253 Ala. 54, 42 So.2d 829 (1949), is not to the

contrary. In that case, the court considered whether the negli-

gence of the attorney who abstracted title to mortgaged proper-

ty under the Federal Land Bank of New Orleans’ pre-1946

system of certifying title should be attributed to the Bank.

The court accepted the Bank’s contention that it should not

because the attorney was the agent of the borrower, not the

Bank. Under the Bank’s pre-1946 system of ascertaining wheth-

er the Bank’s security interest was a first lien, the Bank’s own

in-house attorneys reviewed the abstracts of title furnished

by an approved attorney and determined whether the state of

the title met the Bank’s first lien requirements. Thus, the pre-

1946 system lacked the present system’s reliance on the outside

attorney’s judgment. Under these circumstances, we do not

think that Henderson binds the Bank today.

1) The Mississippi Bar points out that the ABA report cited above criti-

cizes the conventional arrangement. The report suggests that the

borrower needs the protection more, and, since the lawyer can represent

only one party where conflicts arise, the lawyer should represent the

borrower. The report recognizes, however, that existing views accept

that the lawyer represents the lender.

Our conclusion that the client of the closing attorney is the

Bank leaves little to discuss of the appellants’ substantive

arguments. The appellants’ due process claim is that the classi-

fication between those lawyers who remained on the approved

list and those who did not is irrational in violation of the equal

protection component of the due process clause of the fifth

amendment. 8/ The appellants conceded at oral argument,

however, that if the Bank retained a single attorney in each

community to do its business, the effect would be no different

than where a United States attorney’s office hires an individual

attorney, and the equal protection clause would not be impli-

cated. To distinguish this concession, the appellants seize on

the statement in the Bank’s September 16, 1974, letter that

“{a]rbitrary decisions have been made in some instances

prompted by our desire to reduce the overall number of attor-

neys involved.” Even if the attorneys on the list represent the

Bank, the appellants argue, where the Bank maintains a list

rather than retaining a single attorney, it cannot make such

arbitrary and admittedly subjective decisions.

This fails to distinguish the Bank’s list from the retainer of

a single attorney. The classification which the list creates is

simply one between those attorneys retained and those not;

there is no allegation that the line drawn is one “‘directed

‘against’ any individual or category of persons.” Marshall v.

8/ Of course, the fifth amendment does not mention “ ‘the equal pro-

tection of the laws,’ ” but equal protection is an element of due process.

Bolling v. Sharpe, 347 U.S. 497, 499, 74 S.Ct. 693, 694, 98 L.Ed. 884

(1954). “Equal Protection analysis in the Fifth Amendment area is the

same as that under the Fourteenth Amendment.” Buckley v. Valeo, 424

U.S. 1, 93, 96 S.Ct. 612, 670, 46 L.Ed.2d 659 (1976).

United States, 414 U.S. 417, 428, 94 S.Ct. 700, 707, 38 L.Ed.

2d 618 (1974). As such, it is sufficient that the classification

bears some rational relationship to the Bank’s objectives, 9/

There is also no contention that the Bank’s decision to reduce

the number of attorneys involved in closings, apart from the

means chosen to carry out this decision, was in any way un-

founded or constitutionally infirm. We think that, faced with

large numbers of attorneys indistinguishably qualified to certi-

fy titles and carry out closings for the Bank, an “‘arbitary”

reduction was a rational means of achieving the desired end. If

the Bank is a federal entity for the purposes of its decision to

reduce the attorneys who represent it in its closing business,

therefore, its reduction of the list of eligible attorneys would

not violate due process.

If the Bank is a private entity, the appellants’ antitrust

claim is precluded by our decision in Forrest v. Capital Building

& Loan Association, 504 F.2d 891 (Sth Cir. 1974), aff’g 385

F. Supp. 831 (M.D. La. 1973). In that case, we held that two

savings and loan associations’ practice of requiring their bor-

rowers to pay the legal fees of attorneys which the associations

selected to examine and certify title and prepare closing papers

for mortgage loans was not tying prohibited by the antitrust

9/ Massachusetts Bd. of Retirement v. Murgia, 427 U.S. 307, 314, 96

S.Ct. 2562, 49 L.Ed.2d 520 (1976); City of New Orleans v, Dukes, 427

U.S. 297, 303-04, 96 S.Ct. 2513, 49 L.Ed.2d 511 (1976); Woods v. Holy

Cross Hosp., 591 F.2d 1164, 1176 (5th Cir. 1979); Jackson v. Marine

Exploration Co., Inc., 583 F.2d 1336, 1346 (5th Cir. 1978). See id. at

1346: “To respond to this argument with [a] more than a few perfunc-

tory cites to decisions such as Railway Express Agency v. New York, 336

U.S. 106, 69 S.Ct. 463, 93 L.Ed. 533 . . . and Williamson v. Lee Optical

Co., [348 U.S. 483, 75 S.Ct. 461, 99 L.Ed. 563], supra, gives it a stature it

scarcely deserves.”

ihe.

laws. Our. conclusion that the attorneys on the Federal Land

Bank’s approved list represent the Bank and not the borrower

leaves no room for a distinction between the present case

and Forrest.

The decision of the district court is

AFFIRMED.

a:

APPENDIX B

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF MISSISSIPPI

EASTERN DIVISION

JOHN D. SIBLEY,

Plaintiff

v,

THE FEDERAL LAND BANK OF NEW ORLEANS,

Defendant

and

BOARD OF COMMISSIONERS OF THE

MISSISSIPPI STATE BAR,

Intervenor

No. EC 74-116-S

MEMORANDUM OF DECISION

This is an action brought by Plaintiff John D. Sibley (plain-

tiff), a member of the Bar of this court and of the Mississippi

State Bar. Plaintiff practices law in Okolona, Chickasaw

County, Mississippi.

The Mississippi State Bar (Bar), an association created by

1/ All resident persons admitted to practice law in Mississippi are re-

quired to be members of the Mississippi State Bar. M

3-103 (1972). " - Miss. Code Ann. § 73-

-28-

statue, 2/ was thereafter permitted to intervene as a party in

interest on behalf of its members. The original complaint was

brought as a class action on behalf of all practicing attorneys

within the state. When the complaint of intervention was filed

on behalf of the class members, plaintiff filed an amended

complaint seeking only individual relief.

The defendant is the Federal Land Bank of New Orleans

(Bank) a federally chartered instrumentality of the United

States. The Bank was chartered March 8, 1917, pursuant to

the Federal Farm Loan Act of 1916. The Bank’s only office

since its inception has been and is now located at New Orleans,

Louisiana, which is its corporate domicile. The Bank serves

an area composed of the States of Mississippi, Louisiana and

Alabama, and operates under the supervision of the Farm

Credit Administration, an independant agency of the executive

branch of the government.

The organic law under which the Bank and its associations

were established and which superseded prior federal laws, is

the Farm Credit Act of 1971, Public Law 92-181, 12 U.S.C.

§§ 2001-2259 (Act). Regulations promulgated by the Farm

Credit Administration pertaining to the Bank and its associa-

tions are found in 12 C.F.R. § § 600-619.

The Bar and the Bank have each moved for summary judg-

ment. All parties, including plaintiff, have represented to the

2/ Miss. Code Ann. § 73-3-101 (1972) provides:

The resident lawyers now authorized to practice law in the

State of Mississippi are hereby and herewith constituted an

association which shall be known as the Mississippi State Bar.

court that there is no geninune issue as to any material fact

and that summary judgment procedure is the proper vehicle

to determine the rights of the parties. The action has been

submitted on the pleadings, depositions, answers to interro-

gatories, admissions on file together with the affidavits pre-

sented by parties.

The record in the action sub judice reflects the facts which

follow herein.

of the voting stock of the Bank is owned by the associa-

vou which the Benk charters. See, Farm Credit Act of 1971,

12 U.S.C. § 2001, et seq. These associations are situated in

the area of the United States served by the Bank. The stock

may not be transferred, pledged, or hypothecated, except

as authorized by the applicable chapter of the Act. 12 U.S.C.

§ 2013. Each of the twelve Mississippi associations chartered

by the Bank are obligated to subscribe on behalf of the associa-

tion for stock of the Bank equal to not less than $5.00 nor

more than $10.00 per $100 of the amount of the aggregate

loans desired or held by the members of the association. 12

U.S.C. § 2031. When an association makes a loan available to

a farmer or rancher, the applicant must subscribe to stock in

the association in an amount not jess than 5 per centum nor

more than 10 per centum of the full amount of the loan as

determined by the Bank. The stock must be paid for at the time

the loan is closed. The association must then purchase a similiar

amount of stock in the Bank. When the loan is repaid the stock

is retired at its fair book value not to exceed par value. 12 U.

S.C. § 2034.

The Bank may borrow money and issue notes, bonds, deben-

tures, and other obligations individually or in concert with one

or more other banks of the system of such character and on

such terms, conditions, and rates of interest as may be de-

termined. 12 'J.S.C. § 2012 (10). The loans made by the Bank

shall not exceed 85 per centum of the appraised value of the

-30-

real estate security, and shall be secured by first liens on interest

in real estate of such classes as may be approved by the Farm

Credit Administration. The value of security shall be deter-

mined by appraisal under application standards prescribed by

the Bank and approved by the Farm Credit Administration,

to adequately secure the loan. 12 U.S.C. § 2017.

The Bank is a privately owned, privately capitalized insti-

tution which makes long term first mortgage loans on farm

land to farmers and ranchers throughout the area served by its

associations. The Bank does not lend government funds and

neither its loans nor its obligations are guaranteed by the

United States Government.

The Bank has a seven person board of directors which es-

tablishes policies under which operating procedures are de-

veloped. Two of the members of the Board are elected by the

associations of the Bank, i. e., the associations of farmers and

ranchers which have been created and chartered by the Bank.

12 U.S.C. § 2223 (a).

The Act does not provide guidance for the manner in which

the Bank shall determine that the loans made by it are secured

by first liens on interest in real estate of such classes as may

be approved by the Farm Credit Administration. The regu-

lations promulgated by the Farm Credit Administration are

silent on the procedure to be utilized by the member banks

in making the determination. The Board of Directors of the

Bank have not formulated a plan to be followed by the mana-

gement of the Bank. The Bank acts, however, through its duly

elected and authorized personnel. In this instance the Bank’s

General Counsel, W. Brian Rabin, Esq., is charged with the duty

and responsibility of approving and coordinating the closing

of loans for the Bank. He is responsible for insuring that loans

made by the Bank are secured by first mortgages. It was under

Mr. Rabin’s direction ans supervision that the “New Loan

Closing Procedure” was introduced in the fall of 1974. The

-31-

object of this litigation is to enjoin the implementation of this

plan for the closing of loans by the Bank as being in violation

of the constitutional rights of plaintiff and other members

of the Bar.

The activities of the Bank in furnishing credit for the farmers

and ranchers within the area served by the Bank are extensive.

The Bank has been engaged in that service for more than 60

years. The record reflects that for the period from and includ-

ing 1965 to and including 1974, the Bank closed 11,052 loans

aggregating the sum of $402,033,000 in which the service of

a Mississippi attorney was required. The loans increased during

the period from 1,174 loans amounting to $19,938,100 in

1965 to 1,303 loans amounting to $63,083,100 in 1974.

For more than 50 years the Bank has maintained a list of

Mississippi attorneys approved to participate in loan closings.

Orginally, attorneys were approved to submit abstracts of

title which were reviewed by staff attorneys located in the

Bank with the loans ultimately closed by the attorney sub-

mitting the abstract. Attorneys preparing abstracts also certi-

fied to the validity of title. In addition, abstracts were prepared

by non-attorneys and these abstracts were likewise reviewed and

approved by Bank attomeys.

In 1946, a change in the system was implemented whereby

selected attorneys were approved to submit certificates of

title. At that time, of the 82 counties existing in Mississippi,

there were 40 where attorney’s certificates would be accepted

The attorneys whose names appeared on the approved list were

selected on the basis of recommendations from filed personnel,

recommendations of fellow practitioners, the number of years

of experience in the title practice field with particular reference

to the degree of proficiercy in this practice by the attorney

involved and by reference to publications such as Martindale -

Hubbell. Generally, the professional proficiency and reputa-

tion of the attorney in the community were considered his-

32-

torically relevant to approval as a closing attorney.

Over the years the list of approved attorneys continued to

grow so that in 1974 the Bank’s list in the three states - Ala-

bama, Mississippi and Louisiana - contained more than 1,400

firms, which included an estimated 3,000 to 3,500 attorneys.

This list contained an estimated 30% of all licensed practitioners

in the three states. In Mississippi alone the firms appearing on

the list had grown to 556 in 1974.

The Bank’s management became concerned over the ever in-

creasing number of attorneys on the list, many of whom had

become for one reason or another inactive in the title practice

field. For reasons which Bank management determined to be

satisfactory, a new loan closing procedure was instituted with

the view of improving the service rendered its borrowers, and,

at the same time, reducing the costs of the service and increas-

ing the income to be derived by the Bank from the loans

closed. The record is replete with the reasons which manage-

ment believed dictated such a new loan closing procedure on

its part. Since the court finds that the Bank’s management,

being charged with the duty of properly conducting the affairs

of the Bank, could act upon its own findings in that regard,

and neither the plaintiff nor the class represented by the inter-

venor have legal grounds to question the Bank’s motive in

adopting a new loan closing procedure, the court does not feel

that a discussion of the reasons activating the action of the

Bank would be of benefit to any interested party.

To carry into effect the new loan closing procedure the

Bank’s general counsel, Mr. Rabin, addressed a series of letters

to the attorneys on the approved list who were being removed,

the attorneys who were being retained, and the borrowers of

the Bank.

The letter to the attorneys who were not being retained on

the approved list, mailed on September 16, 1974, stated the

33-

reasons for the Bank’s action and did not in the opinion of the

court, contain any offensive or detrimental remarks. The

letter related in clear and adequate language the need for a

reduction of the list.

The letter to those attorneys who were retained on the list

of approved attorneys, released on September 16, 1974, advised

them of the new closing procedure and solicited their profes-

sional expertise in cooperating with the Bank to make the new

procedure a successful undertaking.

The letter of information going forward to the borrowers

on October 14, 1974, in a tactful way acquainted them with

the new procedure. It did not, in any since, cast a reflection

upon the professional integrity or competency of those attor-

neys who were being removed from the approved list.

The decision to remove some attorneys form the approved

list and retain others was made by Mr. Rabin and his associates

in the legal department, after checking with field personnel.

The record shows that important factors in the decision to

inaugurate the new closing procedure were the interest which

the Bank had in providing more effecient service to the bor-

rower and in reducing the number of approved attorneys to

a more manageable level. Mr. Rabin listed as the basic criteria

used by him and his staff in the selection of the attorneys to

be retained on the approved list, as being the professional com-

petency of the attorney, the activity of the attorney in title

practice, the reputation of the attorney for the efficient and

prompt handling of assignments, and the volume of the Bank’s

business recently handled by the attorney.

While using the criteria above-mentioned, and receiving

recommendations of field personnel, the record reflects that

the ultimate decision was that of Mr. Rabin.

The Rank takes the position that the attorneys used to close

-34-

loans for the Bank are attorneys for the Bank with whom

the Bank has an attorney-client relationship; that the attorneys

are selected for the purpose of insuring that the Bank obtains

a first mortgage on the real estate interest of the borrower

pledged as security, according to statutory provisions; that the

Bank has the basic and fundamental right of all persons to use

counsel of its own choice within the requirements of federal

law; and that no federal statute or constitutional provision

proscribes the enjoyment of such a right.

The Bank argues that the purpose of restricting the number

of attorneys to close its loans is to benefit its borrowers and

enable the Bank to efficiently administer a credit system for

farmers and ranchers in the area which it serves according to

congressional mandate. To accomplish this purpose, the Bank

urges that it must be permitted to select attorneys of its own

choosing to perform the work for the Bank, the selection to

be made by its duly authorized officials.

Plaintiff and the members of the Mississippi State Bar con-

tend that the Bank, as a federal instrumentality, should be

required to accept the loan closing services of any Mississippi

attorney selected by the borrower who meets reasonable,

objective standards and is able and qualified to adequately

perform the necessary legal work involved in closing the loan.

They argue in support of this position that a failure of the Bank

to recognize this right on the part of the members of the Missis-

sippi Bar acts to decrease competition in the handling of inter-

state loans, denies prospective borrowers the fundamental and

traditional right of having their business handled by an attorney

of their choice and denies qualified attorneys, who are not on

the Bank’s approved list, the right to practice their profession

and have an opportunity to meet reasonably objective standards

so as to engage in the practice of law.

The court must observe at this point that plaintiff and in-

tervenor do not have standing to assert a right on behalf of

-35-

ee) Per Te i er

Prospective borrowers. Since such persons are not parties to

the action the court is not therefore, concerned with this aspect

of the controversy.

The parties have devoted a large part of their briefs to the

question of whether the Bank is an agency of the United States

Government. While the Bank owes its existence to the statu-

tory law of the United States, and is subject to federal super-

vision, it is privately ewned and capitalized. 12 U.S.C. §§

2001 et. seq. In this regard, its operations are not unlike those

of a federally chartered savings and loan association, 12 U.S.C.

§§ 1464, et seq.; or a national bank, 12 U.S.C. §§ 21 et.

seq.; or other financial instrumentalities of the government

too numerous here to mention.

The Bank must look to the attorney who certifies the title

to provide the Bank with a good, valid and enforceable first

mortgage lien on the property involved. Being under such an

obligation to the Bank it can hardly be said that the attorney

does not represent the Bank in closing the loan or that the

relationship of attorney and client does not exist. It is true that

the borrower must pay the fee of the attorney for closing the

loan, but this is only a part of the loan expense which the

borrower assumes as a part of the loan transaction, just as other

expenses, such as appraisal fee, recording costs, etc. Such is the

normal procedure in the industry.

If a conflict of interest arises the attorney cannot represent

both parties. The attorney can be true to only one trust -

his allegience cannot be divided. The borrower is not pro-

hibited from employing an attomey of his choice to represent

his interest in securing and closing the loan.

It is inconceivable that the court by judicial fiat should

compel the Bank to accept the services of any Mississippi

attorney, who might or might not be acceptable to it, but

who is qualified to perform the work necessary to properly

-36-

close a loan for the Bank pursuant to reasonable standards

established by the Bank under the court’s supervision. In such

a case, the Bank would not have any control over the number of

attorneys in a given state who would be authorized to close its

loans, and the result would be an inefficient and unsatisfactory

method of loan closure from which both the Bank and the

borrower would suffer. As the United States Court of Appeals

for the Fifth Circuit said in a per curiam opinion released

December 9, 1974, in Forest v. Capital Buildings & Loan Assn.,

504 F.2d 891 (1974), cert. denied, 421 U.S. 978, 44 L.Ed.2d

470, 95 S.Ct. 1980 (1975), “We agree with the defendant...

that [its] procedures are in accordance with the basic and

fundamental right of all persons to use counsel of [its] own

choice and within the requirements of state and federal law.”

The court has determined that plaintiff and the class repre-

sented by the intervenor, do not have any right of which

they have been deprived by the Bank, which is protected by

the due process requirement of the Fifth Amendment to the

Constitution of the United States. The method used by the

Bank for the selection of attorneys to represent it in the closing

of loans does not constitute an unreasonable intereference with

their right to follow their chosen profession within the “‘liber-

ty” and “property” concepts of the Fifth Amendment. The

right of an attorney to practice law is not impaired or denied

by the Bank’s procedure.

The court recognized the right of every person to practice

his or her chosen profession free from unreasonable govern-

mental interference in Lipman v. Van Zant, 329 F. Supp.

391 (N.D. Miss. 1971). See also United States v. Briggs 514

F.2d 794, 798 (Sth Cir. 1975). The Bank’s right to select its

own counsel does not, however, impinge upon the right of

plaintiff as a member of the Mississippi Bar to practice law.

The right to practice does not encompass the right to represent

any designated party, whether that party is a private individual,

a public institution, or a governmental agency or instrumen-

-37-

tality.

The plaintiff and intervenor also contended that the Bank’s

new closing procedure dampens competition and violates

the public policy of the United States as expressed in the

Sherman Act and the Administrative Procedure Act. The court

is not persuaded that the position is well taken. The fifth

Circuit rejected a challenge by the attorneys involved in Forest,

supra, that the practice followed by the building and loan

associations violated the Antitrust provisions of Sections

1 and 2 of the Sherman Act, 15 U.S.C. §§ 12, et. seq.

The intervenor and plaintiff cite a section 81-11-31 of the

Mississippi Code Annotated in support of their position. While

the state statute would not control the activities of the Bank

in any event, the court takes notice of the provision that

“(t]he borrower shall be advised by the association in writing

of his right to select an attorney, provided, however, such

attorney is on an approved list of a title insurance company

acceptable to the association, and authorized to do business

in the State of Mississippi. Title insurance is used herein as a

criterion for qualification of attorneys only, ... .” The

statute invests title companies authorized to do business in

Mississippi with the right to designate the Mississippi attorneys

who are to be protected by the statue but provides no guide

for such selection. The court is not persuaded that this Missis-

sippi statute enhances the rights here asserted by plaintiff or

the intervenor, .

The plaintiff and intervenor argue that the action of the

Bank in concert with its associations violates the civil rights

of plaintiff and other Mississippi attorneys. To support their

contention they rely upon 42 U.S.C. § 1985.

(3). | The charge against the Bank is that it acted arbitarilly

to deprive plaintiff and members of the bar of a “property

right” or “interest” within the concepts of the Fifth Amend-

-38-

ment. There is no evidence to support the argument that the

Bank conspired with anyone to adopt the new closing proce-

dures. The record reflects that in formulating the new proce-

dure, the Bank’s legal staff conferred with field personnel

including officers of the associations. But there is no evidence

to support a theory of conspiracy. The Fifth Circuit in the

F.2d 2d 919, 923 (Sth Cir. 1977) listed four elements which

are necessary to support an action under Section 1985 (3).

The first two are “(1) the defendants must conspire, [and]

(2) for the purpose of depriving, either directly or indirectly,

any person or class of persons of the equal protection of the

laws, or of equal privileges and immunities under the laws.”

Neither of these elements is shown to exist in the action sub

judice.

In summary, the court holds that there is no genuine issue

as to any material fact and that the Bank is entitled to a judg-

ment as a matter of law.

The Court will enter the appropriate judgment.

This 22nd. day of March, 1977.

IRMA R. SMITH /s/

UNITED STATES DISTRICT

JUDGE

-39.

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

NO. 77-1817

D.C. Docket No. EC-74-116-S

JOHN D. SIBLEY,

Plaintiff-Appellant,

VERSUS

THE FEDERAL LAND BANK OF NEW ORLEANS,

Defendant-Appellee,

and

BOARD OF COMMISSIONERS OF THE MISSISSIPPI

STATE BAR,

Intervenor-Appellant.

Appeals from the United States District Court for the

Northern District of Mississippi

Before TUTTLE, TJOFLAT and HILL, Circuit Judges.

JUDGMENT

This cause came on to be heard on the transcript of the

record from the United States District Court for the Northern

District of Mississippi, and was argued by counsel;

ON CONSIDERATION WHEREOF, It is now here ordered

and adjudged by this Court that the judgment of the said

District Court in this cause be, and the same is hereby, affirmed;

It is further ordered that the plaintiff-Appellant and the

intervenor-Appellant pay to the defendant-appellee the costs

on appeal, to be taxed by the Clerk of this Court.

June 20, 1979

41-

APPENDIX D

SUS.C,

§ 500 Administrative practice: general provisions

(b) An individual who is a member in good standing of the

bar of the highest court of a State may represent a person be-

fore an agency on filing with the agency a written declaration

that he is currently qualified as provided by this subsection

and is authorized to represent the articular i

e

behalf he acts. : worse

12 U.S.C.

§ 2002. Farm Credit System

The Farm Credit System shall include the Federal land banks

the Federal land bank associations, the Federal intermediate

credit banks, the production credit associations, the banks for

cooperatives, and such other institutions as may be made a

part of the System, all of which shall institutions as may be

made a part of the System, all of which shall be chartered by

and subject to the supervision of the F : os

tration. arm Credit Adminis-

§ 2011 Establishment; title; branches

The Federal land banks established pursuant to section 4

of the Federal Farm Loan ‘Act, as amended, shall continue as

federally chartered instrumentalities of the United States

Their charters or organization certificates may be modified

from time to time by the Farm Credit Administration, not

inconsistent with the provisions of this subchapter, as may be

necessary or expedient to implement this chapter. Unless an

existing Federal land bank is merged with one or more other

such banks under section 2181 of this title, there shall be a

42-

Federal land bank in each farm credit district. It may include

in its title the name of the city in which it is located or other

geographical designation. When authorized by the Farm Credit

Administration, it may establish such branches or other offices

as may be appropriate for the effective operation of its business.

§ 2013. Land bank stock - Par value; classes

(a) The capital stock of each Federal land bank shall be

divided into shares of par value of $5 each, and may be of such

classes as its board of directors may determine with the ap-

proval of the Farm Credit Administration.

voting stock

(b) Voting stock of each bank shall be held only by the

Federal land bank associations and direct borrowers and bor-

rowers through agents who are farmers or ranchers, which

stock shall not be transferred, pledged, or hypotheticated!/

except as authorized pursuant to this chapter.

Nonvoting stock

(d) Nonvoting stock may be issued to the Governor of the

Farm Credit Administration, and may also be issued to Federal

land bank associations in amounts wh'ch will permit the bank

to extend financial assistance to eligible persons other than

farmers or ranchers. Participation certificates with a face value

of $5 each may be issued in lieu of nonvoting stock when the

bylaws of the bank so provide.

12 U.S.C.

§ 2014 Real estate mortgage loans

The Federal land banks are authorized to make long-term

43-

real estate mortgage loans in rural areas, as difined by the Farm

Credit Administration, and continuing commitments to make

such loans under specified circumstances, or extend other

financial assistance of a similar nature to eligible borrowers,

for a term of not less than five nor more than forty years.

§ 2016 Eligibility

The services authorized in this subchapter may be made

available to persons who are or become stockholders or mem-

bers in the Federal land bank associations and are (1) bona

fide farmers and ranchers, (2) persons furnishing to farmers

and ranchers farm-related services directly related to their

on-farm operating needs, or (3) owners of rural homes.

§ 2017. Security

Loans shall not exceed 85 per centum of the appraised

value of the real estate security, and shall be secured by first

liens on interest in real estate of such classes as may be ap-

proved by the Farm Credit Administration. The value of se-

curity shall be determined by appraisal under appraisal stan-

dards prescribed by the bank and approved by the Farm Credit

Administration, tu adequately secure the loan. However,

additional security may be required to supplement real estate

security, and credit factors other than the ratio between the

amount of the loan and the security value shall be given due

consideration.

§ 2223. Election and appointment of district directors -

Electing and appointing bodies

(a2) Two of the district directors shall be elected by the

Federal land bank associations, two by the production credit

associations, and two by the borrowers from or subscribers

to the guaranty fund of the bank for cooperatives. The seventh

member shall be appointed by the Governor with the advice

and consent of the Federal Farm Credit Board.

§ 2227. Powers of the district farm credit board

(a) Each farm credit district board shall have power to—

(1) Act as the board of directors for the district and of the

several banks of the System in the district.

§ 2241. Independent agency of executive branch: composition

The Farm Credit Administration shall be an independent

agency in the executive branch of the Government. It shall be

composed of the Federal Farm Credit Board, the Governor

of the Farm Credit Administration, and such other personnel

as are employed in carrying out the functions, powers, and

duties vested in the Farm Credit Administration by this chap-

ter.

§ 2242. Federal Farm Credit Board — Establishment: member-

ship; designation and appointment of members

(a) There is established in the Farm Credit Administration

a Federal Farm Credit Board. The Board shall consist of not

more than thirteen members, one of whom shall be designated

by the Secretary of Agriculture. The remainder of the Board

shall be appointed by the President, with the advice and consent

of the Senate, one from each farm credit district, to be known

as the appointed members.

»

i

45-

APPENDIX E

on the borrower’s interest or its equivalent from a security

12 FEDERAL CODE OF REGULATIONS standpoint.

§ 614.4230 (a) Primary security for a Federal land bank shall

consist of a first lien on interest in real estate. In the case

of nonfarm rural home loans, the primary security shall

be a first lien on the rural residence being financed. The

real estate interest must be mortgageable interest under

deeds or leases which reasonably may be considered ade-

quate to afford the security of a first lien upon the rights

and interest on which the loan is predicated. Collateral

closely aligned with, an integral part of, and normally

sold with real estate may be included in the appraised

value of the security upon which a loan is based. Appraised

value shall be determined within approved standards

and shall include in the evaluation either farmlands,

eligible farm-related businesses, or eligible rural residences,

whichever is appropriate for the type of loan being made.

§ 614.4300 Banks and associations may impose reasonable

charges or fees to members, borrowers, or applicants in

connection with loans or other services rendered. Fees

charged by the associations shall be subject to bank ap-

proval.

§ 614.5060 If the chief counsel for a Federal land bank has

determined in writing that bank procedures provide

sufficient safeguards to assure that a loan made by the

bank will be secured by a first lien or its equivalent on

interest in the primary real estate security, an attorney

lien certification need not be obtained at the time a note

is accepted for collateral. The note shall be withdrawn

from collateral upon the expiration of one year from the

date of loan closing, unless before the end of such period,

an attorney has certified that the interest of the bank in

the primary real estate security for that loan is a first lien

46- 47-

CERTIFICATE OF SERVICE

'

|

i

f

I, Leslie Darden, an attorney for Petitioner do hereby certify

that I have served 3 copies of this Petition upon Grady Tollison,

Esq., attorney for The Federal Land Bank of New Orleans, and

upon Michael Malski, Esq., attorney for John Sibley by de-

positing the same in a United States Post Office with first class

postage prepaid, addressed to the above named Counsel at their

respective post office addresses, which are within 500 miles.

This 27 day of SEATE NBER 979.

Attorney for Petitioner