Opposition Brief — Northeast Bancorp, Inc. v. Board of Governors, FRS
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No. 84-363 (® [Oifice Supreme Court, U.S.
IN THE
Supreme Court of the Unite ———,
OCTOBER TERM, 1984 ves
<j
NORTHEAST BANCORP, INC., UNION TRUST COMPANY and CITICORP,
Petitioners,
—against—
THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM,
Respondent,
—and—
BANK OF NEW ENGLAND CORPORATION, CBT CORPORATION, HARTFORD
NATIONAL CORPORATION, THE COMMONWEALTH OF MASSACHUSETTS,
THE STATE OF CONNECTICUT and BANK OF BOSTON CORPORATION,
Intervenor-Respondents.
ON PETITION FOR AWRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
BRIEF OF INTERVENOR-RESPONDENTS CBT CORPORATION,
BANK OF NEW ENGLAND CORPORATION AND HARTFORD
* NATIONAL CORPORATION IN OPPOSITION TO PETITION
FOR WRIT OF CERTIORARI
WILMOT T. POPE* BERTRAM M. KANTOR*
CHOATE, HALL & STEWART MICHAEL H. ByowiTZz
60 State Street WACHTELL, LIPTON, ROSEN & KATZ
Boston, Massachusetts 02109 299 Park Avenue
(617) 227-5020 New York, New York 10171
Counsel for Intervenor-Resposdent (212) 371-9200
Bank of New England Corporation Counsel for Intervenor-Respondent
Of Counsel: CBT Corporation
LAURENCE H. TRIBE DOUGLAS M. KRAUS*
Griswold Hall 307 SKADDEN, ARPS, SLATE,
1525 Massachusetts Avenue MEAGHER & FLOM
Cambridge, Massachusetts 02138 919 Third Avenue
New York, New York 10022
(212) 371-6000
Counsel for Intervenor-Respondent
*Counsel of Record Hartford National Corporation
QUESTIONS PRESENTED
When Congress enacted Section 3(d) of the Bank Holding
Company Act of 1956 (commonly known as the “Douglas
Amendment”) it imposed a federal prohibition against inter-
state bank acquisitions by out-of-state bank holding compa-
nies, and at the same time authorized the states, if they wished,
to lift this federal bar—as Senator Douglas stated—“to the
degree” that they deemed desirable. In the words of a co-spon-
sor of the Douglas Amendment, Congress thereby deemed
interstate bank acquisitions to be “a matter of primary concern
to state governments” and “an area best left to their discre-
tion.”
In 1982, Massachusetts enacted a statute pursuant to the
Douglas Amendment which permits an out-of-state bank hold-
ing company located in any New England state to acquire a
bank located in Massachusetts if the acquiror’s home state has
adopted reciprocal legislation permitting bank acquisitions by
Massachusetts bank holding companies. In 1983, Connecticut
enacted a similar statute. Thereafter, the Board of Governors
of the Federal Reserve System approved, over petitioners’
constitutional objections, three applications concerning inter-
state transactions involving Massachusetts and Connecticut
banking organizations. The Second Circuit, in affirming the
Board’s approval orders, rejected petitioners’ constitutional
challenges to the Massachusetts and Connecticut Acts.
The issue in this case is nof—as petitioners claim—whether
Congress intended to permit the states to “balkanize” the
nation’s banking system. Congress itself, by enacting the
Douglas Amendment over 28 years ago, effectively partitioned
the nation’s banking system along state lines. Rather, the
questions presented in this case are:
1. Whether state legislation may be challenged based upon
purported discrimination against interstate commerce, en-
croachment upon federal supremacy and “balkanization” of
the nation’s banking system where Congress, in the Douglas
Amendment, prohibited a// interstate bank acquisitions and, in
order to render state policy determinations paramount, autho-
rized the states to determine for themselves whether and to
what degree to permit such acquisitions?
2. Whether the Massachusetts and Connecticut Acts imper-
missibly restrain interstate commerce where Congress, in the
Douglas Amendment, authorized the states to be selective in
determining which out-of-state bank holding companies may
acquire in-state banks?
3. Whether the Massachusetts and Connecticut Acts im-
properly encroach upon federal supremacy in violation of the
Compact Clause where Congress, in the Douglas Amendment,
chose to defer to potentially disparate state policy determina-
tions in the area of interstate bank acquisitions?
TABLE OF CONTENTS
EE
Nee TT ee we ec eebeccceces
De we eeeee
a.
b
c
d
e
The Federal Statutory Context.................
Subsequent Developments ....................
The Challenged Statutes ..........cccccccccees
The Relevant Transactions and Board Proceedings
TT so ccceccccccccccscccccccecs
Reasons for Denying the Writ.......................
«
I.
II.
IIl.
Congress In The Douglas Amendment Has Deter-
mined That The States Should Choose For Them-
selves Whether And To What Degree The Federal
Bar To Interstate Bank Acquisitions Should Be
All Prior Judicial And Administrative Precedents
Interpreting The Douglas Amendment Recognize
That Congress Authorized The States To Be Selec-
tive In Lifting The Federal Barrier To Interstate
ee rece epee vscacceccees
There Is No Conflict With This Court’s Prior
Commerce Clause And Compact Clause Prece-
PAGE
on MN BY KN NN
11
15
19
28
iv
TABLE OF AUTHORITIES
Cases: PAGE
American Trucking Ass’ns v. Atchison, T.&S.F. Ry., 387
i See eos ch ededutabedueenenseuseunee 20-21n.56
City of Milwaukee v. Illinois, 451 U.S. 304 (1981) . .20-21n.56
Conference of State Bank Supervisors v. Conover, 715
F.2d 604 (D.C. Cir. 1983), cert. denied, 104 S.Ct. 1708
| PPPPTTTET CITE CRT EP error ere 18&n.49
Federal Energy Administration v. Algonguin SNG, Inc.,
Gy Se a ob ande0ocbsnnaseeakideteeces 14n.35
Fidelity Federal Savings & Loan Ass’n v. de la Cuesta,
GO Tee. OO Cs 6 00.0 nsncssnnestlescaesaeeds 26n.65
First Union Bank & Trust Co. v. Heimann, 600 F.2d 91
Ge aD I s 6.0 nocecednceduuvebatnessseaeuecs 14n.32
Hempstead Bank v. Smith, 540 F.2d 57 (2d Cir. 1976) . 14n.32
International Shoe Co. v. Washington, 326 U.S. 310
ere ee ee ee ee ee eee 19n.51
lowa Independent Bankers v. Board of Governors, 511
F.2d 1288 (D.C. Cir.), cert. denied, 423 U.S. 875
Sao ot oon dea otesseane eae 17, 18nn.47&48, 23n.59
Lewis v. BT Investment Managers, Inc., 447 U.S. 27
en eee 3, 4n.8, 19&nn.50&51,
23&n.61
Lewis v. United States, 455 U.S. 55 (1980) ........... 14n.35
New England Power Co. v. New Hampshire, 455 U.S.
8 RR er rrr eer ere 14n.35, 22n.58
New Hampshire v. Maine, 426 U.S. 363 (1976) ....... 24n.62
Prudential Insurance Co. v. Benjamin, 328 U.S. 408
ES 6.60000 606065 0000-085050080 055 ee 19n.51, 21-22
PAGE
Securities Industry Ass’n v. Board of Governors, 52
U.S.L.W. 4962 (U.S. June 28, 1984)............... 16n.43
South-Central Timber, Inc. v. Wunicke, 52 U.S.L.W.
4631 (U.S. May 22, 1984)................. 20n.54, 23n.60
Sporhase v. Nebraska, 458 U.S. 941 (1982)........... 22n.58
United States v. Nat’l Ass’n of Securities Dealers, 422
Se NO BU bk onc. d600 dens ob encdewssinsese 16n.43
United States Steel Corp. v. Multistate Tax Comm’n,
Sg EE ey ee 24n.62, 25n.64
Virginia v. Tennessee, 148 U.S. 503 (1893) .'.......... 24n.62
Western & Southern Life Insurance Co. v. State Board
of Equalization, 451 U.S. 648 (1981) ........... 9, 19n.52,
20n.53, 22
Constitution of the United States:
Commerce Clause, U.S. Const. art. I, § 8,
ice nnpenes cist edb ite od eee teosve aes 7n.20, passim
Compact Clause, U.S. Const. art. I, § 10,
Ps 00666 646660nbb6e06 6b Coun edess 4 ines 7n.21, passim
Due Process Clause, U.S. Const. amend. XIV,
Ditin cchdabeseutsendetebeodesiiecebedenns 7n.22, 8n.24
Equal Protection Clause, U.S. Const. amend. XIV, ,
| Fa er oerr TT Try ror ree 7n.22, passim
Federal Statutes and Rules:
Bank Holding Company Act of 1956
Se Gees OS ON, ica cc weevecdeesccoees 2, passim
SS OE Eo vc eececcecccsvcencteseseees 4n.8
RS Oe isn 664 6e Ch OUROee eee 23-24n.61, 26n.65
BZ UB. § BBGREED occ ccccccccccccccescvcccesess 26n.65
vi
PAGE
12 U.S.C. § 1842(d)(1) (the “Douglas
PE <. tcnn bate at eb bee shu bueedveed 2, passim
fF RP ere ee eee 22n.58
Garn-St Germain Depository Institutions Act of 1982,
Pub. Law 97-320, Section 116, 12 U.S.C.
ED prt ea 6 oi a a ee eee See heey oso tee 26n.65
McCarran-Ferguson Act, 15 U.S.C. § 1012........... 22, 23
McFadden Act, 12 U.S.C. § 36(c).............. 13&n.30, 14
State Statutes and Rules:
Admeme Stat. § GE.G5.295 (ISSA) 2. ccc cccccccccccesess 4n.11
1983 Conn. Acts, Pub. Act No. 83-411 (Reg.
8 re eee ery ee eee 6n.18, passim
Del. Code Ann. tit. 5, § 801 et seq. (Supp. 1982)....... 5n.15
, eS ee fF FF PT errr Teer ee 5n.13
Fla. Stat. Ann. § 658.29 (West Supp. 1983)............ 5n.14
es Ge ae PP A. | vials cia Bide be oe tinend cee $n.13
1984 Ky. Rev. Stat. § 287-900 ef seq. .............005. 5n.13
Ill. Ann. Stat. ch. 17, § 2510 (Smith-Hurd 1981)....... 5n.14
lowa Code Ann. § 524.1805 (West Supp.
SE 5 a e4GR6ehGeee bb 6NeseESES>SnaAel 5n.14, 15n.38
Me. Pub. Law 1983, ch. 302, § 2, as amended
SS odbc aesvb aces 6 ek dene te Ged Chains teense dé 4n.10
Md. Fin. Inst. Code Ann. § 5-903 (Supp. 1983)........ 5n.15
Mass. Ann. Laws ch. 167A § 2 (West Supp.
TD His ctl pe etebhn’s hades ena el 6n.17, passim
1983 Nebraska Laws L.B. Nos. 454 and 58............ 5n.15
Nev. Rev. Stat. fre 6464.4400050544R4R ee 5n.15
Vii
PAGE
N.Y. Banking Law § 142-b (McKinney Supp. 1983). ..,. .5n.12
Petes Wie Wis WF I OP OO, nc cccercscccccediceces 5n.13
I cs cee cc buncwedkesoeeessceseaet 5n.16
R.1. Gen. Laws §§ 19-30-1, 19-30-2 (1983) ............ 5n.13
es es I i i on ns oa hs ee 5n.13
S.D. Codified Laws § 51-16-41 (1983) ................ 5n.15
1984 Utah Code Ann. 7-1-102, 7-1-702 ............... 5n.13
ee a ke ceveksbenesncecpeannt 5n.15
EE pe re, 5n.16
Legislative History:
Control of Bank Holding Companies: Hearings on S.
880, S. 2350 and H.R. 6227 before the Subcommittee
of the Senate Committee on Banking and Currency,
ee GR eee 14-15n.36
Se ET EkKéveeeideccvcscdeteveseteveeews 2
H.R. Rep. No. 609, 84th Cong., Ist Sess.
CSET UL Clea ca witneneadnss veddexhes 2nn.2&3
S. Rep. No. 1095, Pt. 1, 84th Cong., Ist Sess.
PPP TT ETO ET TTT CTT PUTT T TUT TUUTURTT TTL 2n.4
S. Rep. No. 98-560, 98th Cong., 2d Sess. (1984) ...... 20n.56
101 Cong. Rec. 3823, 4407, 8028-8029, 8030-8031, 8033,
INS So Si W nen cddce cub one ceeds os tcceusé 2n.3
102 Cong. Rec. 6752 (1956) (Remarks of Sen.
SEES ore ee 3n.5
102 Cong. Rec. 6858 (1956) (Remarks of Sen.
CE d+ dint ned hte Odie hanes we hakaneh ats 2n.2, 13n.31
Vili
PAGE
102 Cong. Rec. 6860 (1956) (Remarks of Sen.
EE i 5 k006p 65060 08 0 oben ueeeeehae eee 12nn.27&28,
13n.31, 14n.33
102 Cong. Rec. 6860-6861 (1956) (Remarks of Sens.
ES, GS TD oc oc wee condosbeteducees 12nn.27&28
102 Cong. Rec. 6862 (prepared statement of Sen.
0 Pero Te ee er Peer ee 14n.34
130 Cong. Rec. 11153-11154 (1984) (Remarks of Sen.
Bentsen and prepared statements of Sens. Tsongas
i ce ueeneanbebsoadaceen 20n.56
Administrative Proceedings:
Bank of New York Co., 70 Fed. Res. Bull. 527
EE UUs ddsitc bales he Dm caktien is uc 17nn.44&45
Citicorp, 70 Fed. Res. Bull. 431 (1984) .............. 16n.41
Citicorp, 68 Fed. Res. Bull. 499 (1982) .............. 16n.41
Citicorp, 67 Fed. Res. Bull. 181 (1981) .............. 16n.41
First Bank System, Inc., 70 Fed. Res. Bull. _
Ce ode cecncadiveedeee oi 17n.44
General Bancshares Corp., 69 Fed. Res. Bull. 802
le 65:5 40 Mie ied Rec eeheeh eens end 16n.40
NCNB Corp., 68 Fed. Res. Bull. 54 (1982)........ 7. .16n.40
Northwest Bancorporation, 28 Fed. Reg. 21530 (1973),
aff'd, lowa Independent Bankers v. Board of Gov-
ernors, 511 F.2d 1288 (D.C. Cir.), cert. denied, 423
Ses ENG Ub ac cdcuscudéeebidsuss bucde 16nn.39&40
Provident National Corp., 68 Fed. Res. Bull. 194
Pdé.eebeecebeeuensceuereds cumeanneessceres 16n.41
Other:
The American Banker, Nov. 2, 1984, at 1 ............ 4n.9
No. 84-363
IN THE
Supreme Court of the United States
OCTOBER TERM, 1984
>
NORTHEAST BANCORP, INC., UNION TRUST COMPANY
and CITICORRP,
Petitioners,
—against—
THE BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM,
Respondent,
—and—
BANK OF NEW ENGLAND CORPORATION, CBT CORPORATION,
HARTFORD NATIONAL CORPORATION, THE COMMON-
WEALTH OF MASSACHUSETTS, THE STATE OF CONNECTI-
CUT and BANK OF BOSTON CORPORATION,
Intervenor-Respondents.
ON PETITION FOR AWRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
—_$~<_>-
BRIEF OF INTERVENOR-RESPONDENTS
CBT CORPORATION, BANK OF NEW ENGLAND
CORPORATION AND HARTFORD NATIONAL
CORPORATION IN OPPOSITION TO PETITION
FOR WRIT OF CERTIORARI
Respondents CBT Corporation, Bank of New England Cor-
poration and Hartford Nationa! Corporation, all of which
were intervenors in the court below, submit this brief in
opposition to the petition for certiorari filed by Northeast
2
Bancorp, Inc., Union Trust Company and Citicorp (collec-
tively, “petitioners”) in this matter.’
STATEMENT OF THE CASE
a. The Federal Statutory Context. One of Congress’ cen-
_ tral purposes in enacting the Bank Holding Company Act of
1956, 12 U.S.C. § 1841 ef seq. (the “BHC Act”), was to
regulate the interstate expansion of bank holding companies.”
In confronting this problem, Congress considered three al-
ternative approaches, including that which was ultimately
enacted as Section 3(d) of the BHC Act—commonly referred
to as the “Douglas Amendment,” after its sponsor Senator
Paul Douglas of Illinois.
The House of Representatives passed a version of the BHC
Act, H.R. 6227, that contained an absolute prohibition on
interstate bank acquisitions by bank holding companies,
prompted by the concerns of many Representatives about big
business and their desire that banking remain a community-
oriented industry consisting of localized “democratic grass-
roots institution{s].”> This concern was not Shared by a
majority of the Senate Committee on Banking and Currency; it
reported out a bill that permitted interstate bank acquisitions,
subject only to approval by the Federal Reserve Board.* When
l A statement concerning the parent companies, subsidiaries (except
wholly-owned subsidiaries) and affiliates of CBT Corporation, Bank of New
England Corporation and Hartford National Corporation appears in the
Appendix to this brief.
2 By 1956, a number of holding companies had already established
large interstate networks by acquiring banks located outside their home
states. E.g., H.R. Rep. No. 609, 84th Cong., Ist Sess. 2-5, 15 (1955); 102
Cong. Rec. 6858 (1956) (remarks of Senator Douglas).
3 H.R. Rep. No. 609, 84th Cong., Ist Sess. 1-2, 5-7 (1955); accord 101
Cong. Rec. 4407 (Remarks of Rep. Wier), 3823 (Speech of Rep. Rayburn
submitted for the Record by Rep. Spence), 8028-29 (Remarks of Rep.
Patman), 8030-31 (Remarks of Rep. Rains), 8033 (Remarks of Rep.
O’ Hara), 8034 (Remarks of Rep. Marshall) (1955).
4 S. Rep. No. 1095, Pt. 1, 84th Cong., Ist Sess. 10-11 (1955). The
Board of Governors of the Federal Reserve System is referred to herein as the
“Federal Reserve Board” or the “Board.”
that bill reached the Senate floor, its proponents argued that it
was preferable to the House bill which, because it totally
prohibited interstate banking, was said to represent “an unwar-
ranted interference with States’ rights.”
The dispute was resolved by Senator Douglas’ compromise.
The Douglas Amendment prohibits the Federal Reserve Board
from approving the acquisition by a bank folding company
located in one state of a bank located in another state unless
such acquisition is “specifically authorized by the statute laws
of the state in which such bank is located by language to that
effect and not merely by implication.”° As this Court has
observed, the Douglas Amendment “establishes a general fed-
eral prohibition on the acquisition” of in-state banks by
out-of-state bank holding companies. Lewis v. BT Investment
Managers, Inc., 447 U.S. 27, 47 (1980). The Douglas Amend-
ment also authorizes the states “to create exceptions to this
general prohibition, that is, to permit expansion of banking
across state lines where it otherwise would be federally prohi-
bited.” Jd. (emphasis in original). Thus, Congress in the,
Douglas Amendment empowered the states to lift the federal
prohibition on interstate bank acquisitions to the extent that
they desired to do so.’
b. Subsequent Developments. At the time of passage of
the BHC Act and for many years thereafter, no state permitted
its banks to be acquired by out-of-state bank holding compa-
nies. The practical effect of the Douglas Amendment thus was
to divide the nation into separate banking regions defined by
state boundaries. During the last 15 years, however, many large
banking institutions have established an interstate presence
through various means that avoid the constraints imposed
upon banking activities by the Douglas Amendment and other
5 102 Cong. Rec. 6752 (1956) (remarks of Senator Robertson, floor
manager for the Senate Committee’s bill, quoting Senator Maybank).
6 12 U.S.C. § 1842(d){1).
7 A further discussion of the legislative history of the Douglas Amend-
ment appears at pp. 11-14, infra.
4
I
federal and state statutes." Many large bank holding companies
now serve commercial customers nationwide through out-of-
state offices that offer commercial financing, leasing, fac-
toring, cash management and international banking services.
Many large bank holding companies also pursue retail banking
business across state lines through ownership of consumer
finance companies, as well as the use of credit cards, mail
solicitation of deposits and interstate networks of automatic
teller machines.’ Petitioner Citicorp has been on the cutting
edge of these changes through its establishment of interstate
credit card and other special purpose banks, its acquisition of
large savings and loan institutions in California, Illinois and
Florida, and a number of other programs.
As de facto interstate banking has developed, within the last
decade a total of 22 states have moved toward de jure intei-
state banking by enacting laws that create a variety of excep-
tions to the Douglas Amendment’s prohibition of interstate
bank acquisitions. Only one of these states—Maine—permits
virtually unlimited entry by out-of-state bank holding compa-
nies.'° Other states have partially lifted the federal bar in
various ways. Alaska permits acquisitions of existing banks by
out-of-state bank holding companies, but does not permit the
acquisition of banks formed after a specified date.'' New York
8 Under the BHC Act, a “bank” is an institution that both makes
commercial loans and accepts demand deposits. 12 U.S.C. § 1841(c) (1982).
This Court has held that the Douglas Amendment’s general prohibition
applies only to interstate bank acquisitions, and not to the non-bank
activities of bank holding companies. Lewis v. BT Investment Managers,
Inc., 447 U.S. at 47.
9 On November |, the Comptroller of the Currency approved applica-
tions by 13 bank holding companies, including petitioner Citicorp, to
establish a total of 29 so-called “nonbank” or “consumer” banks. The
American Banker, November 2, 1984, at 1. Because such institutions either
do not make commercial loans or do not accept demand deposits, they
arguably fall outside the definition of a “bank” contained in the BHC Act.
See n.8, supra.
10 Me. Pub. Law 1983, ch. 302, § 2, as amended (1984).
11 Alaska Stat. § 06.05.235 (1982).
limits entry to bank holding companies whose home states
permit acquisitions by New York holding companies.'* Nine
states, including Connecticut and Massachusetts, permit inter-
state bank acquisitions by banking institutions located within a
particular region.'? Three states limit acquisitions to “grand-
fathered” out-of-state holding companies which had acquired
in-state banks prior to enactment of the BHC Act.'* Six states
limit entry by out-of-state bank holding companies to the
establishment of special purpose banks which are prohibited
from or restricted in competing with in-state banks.'* Finally,
two states—Oregon and Washington—permit out-of-state
bank holding companies to acquire only “failing banks.”'®
c. The Challenged Statutes. The Massachusetts statute,
enacted in December 1982, authorizes bank holding companies
based in any of the other five New England states—Connecti-
cut, Maine, New Hampshire, Rhode Island and Vermont-—to
acquire Massachusetts banking organizations, provided that
the home state of the acquiror affords reciprocity to Massa-
12 N.Y. Banking Law § 142-b (McKinney Supp. 1983).
13 In addition to Connecticut and Massachusetts, only one other New
England state—Rhode Island—permits acquisitions by New England bank
holding companies, although the New England-only feature of the Rhode
Island statute expireS after two years. R.I. Gen. Laws §§ 19-30-1, 19-30-2
(1983). Six other states have enacted regional reciprocal statutes which limit
entry to out-of-state bank holding companies located in other areas. Fla.
Stat. Ann. § 658.295 et seq.; Ga. Code § 7-1-620 ef seq.; Act of February 3,
1984, ch. 287, to be reported as 1984 Ky. Rev. Stat. § 287-900 er seq.; N.C.
Gen. Stat. § 53-209 ef seq.; S.C. Laws tit. 34, ch. 24, 25; 1984 Utah Code
Ann. 7-1-102, 7-1-702.
14 Fla. Stat. Ann. § 658.29 (West. Supp. 1983); Ill. Ann. Stat. ch. 17,
§ 2510 (Smith-Hurd 1981); lowa Code Ann. § 524.1805 (West Supp. 1982-
83).
15 Del. Code Ann. tit. 5, § 801 ef seg. (Supp. 1982); Md. Fin. Inst.
Code Ann. § 5-903 (Supp. 1983); 1983 Nebraska Laws L.B. Nos. 454 and 58;
Nev. Rev. Stat. ch. 666; S.D. Codified Laws § 51-16-41 (1983); Va. Code
§ 6.1-392 (1983). Also see p. 16 & nn.41 & 42, infra. :
16 1983 Or. Laws ch. 367; 1983 Wash. Laws ch. 157. The Oregon
statute limits acquisitions to holding companies from contiguous states.
6
chusetts banking organizations.'’ In June 1983, Connecticut
passed a similar statute.'*
Neither state permitted interstate bank acquisitions by bank
holding companies prior to the passage of these laws. The
challenged statutes thus operate to permit interstate commerce
between Connecticut and Massachusetts, and potentially
among as many as six New England states, where previously
such commerce had been prohibited by the Douglas Amend-
ment.
Neither the Massachusetts Act nor the Connecticut Act
alters the Douglas Amendment’s prohibition on interstate bank
acquisitions by bank holding companies based outside New
England. Such acquisitions continue to be barred not by state
law, but rather by the federal prohibition contained in the
Douglas Amendment.
d. The Relevant Transactions and Board Proceedings.
After passage of the Connecticut and Massachusetts Acts,
Bank of New England Corporation, based in Massachusetts,
agreed to merge with CBT Corporation, a Connecticut bank
helding company; Hartford National Corporation, another
Connecticut bank holding company, agreed to acquire Arltru
Bancorporation, a Massachusetts bank holding company; and
Bank of Boston Corporation of Massachusetts agreed to ac-
quire Connecticut-based Colonial Bancorp, Inc.
Applications for approval of these transactions were submit-
ted to the Federal Reserve Board. In extensive comments in
opposition to the applications,"® petitioners did not deny that
the Connecticut and Massachusetts Acts permitted interstate
commerce that the Douglas Amendment otherwise would have
17 Mass. Ann. Laws ch. 167A § 2 (West Supp. 1982) (“the Massachu-
setts Act”) (Pet. App. A101-A102).
18 1983 Conn. Acts, Pub. Act No. 83-411 (Reg. Sess.) (“the Connecti-
cut Act”) (Pet. App. A99).
i9 Petitioner Citicorp opposed all three applications. Petitioners North-
east Bancorp, Inc. and Union Trust Company did not oppose Hartford
National Corporation’s acquisition of Arltru Bancorporation or Bank of
Boston Corporation’s acquisition of Colonial Bancorp, Inc.
7
prohibited as a matter of federal law. Nonetheless, petitioners
contended that the Massachusetts and Connecticut Acts vio-
lated the Commerce,” Compact,”' Equal Protection and Due
Process Clauses” of the Constitution.
The Board, in approving the transactions, concluded that
the Connecticut and Massachusetts Acts provided the specific
state statutory authorization required by the Douglas Amend-
ment (Pet. App. A37, A74, A83), and found no adequate basis
to declare the Acts unconstitutional (Pet. App. A38-A41l,
A49-A71, A74-A75, A83). Although the Board questioned
whether the challenged statutes could be sustained under the
Commerce Clause absent the authority conferred on the states
in the Douglas Amendment (Pet. App. A55-A61), after a
lengthy review of the language, history and prior interpreta-
tions of the Amendment (Pet. App. A61-A71), the Board
concluded that ‘‘[{nJothing in the history of the . . . Amend-
ment suggests that the states were to be permitted only to
choose between not allowing out-of-state bank holding compa-
nies to enter, and allowing completely free entry’’ (Pet. App.
A71). The Board thus recognized that Congress in the Douglas
Amendment authorized the states to pursue their own policies
and to allow interstate bank acquisitions on a selective basis.
As for the Compact Clause, the Board viewed the challenged
statutes as ‘“‘part of an effort to create a regional banking
zone,”’ but it did mot find that the New England states had
entered into any actual agreement or confederation (Pet. App.
A51-A52).” The Board recognized that, even if the statutes
20 U.S. Const. art. I, § 8, cl. 3.
21 U.S. Const. art. 1, § 10, cl. 3.
22 U.S. Const. amend. XIV, § 1.
23 Indeed, a “New igland’’ agreement could not reasonably have
been found in light of the widely divergent approaches to interstate bank
acquisitions adopted by the six New England states. Only two other New
England states permit interstate bank acquisitions: Maine permits virtually
unlimited entry while Rhode Island has enacted a statute reciprocal with the
Massachusetts and Connecticut statutes, the New England-only feature of
which expires after two years. See nn. 10 & 13, supra. New Hampshire and
Vermont have not enacted interstate bank acquisition statutes; there, the
Douglas Amendment prohibits all interstate bank acquisitons.
8
were to be considered part of an ‘“‘implicit’’ compact or
agreement, they would violate the Compact Clause only if they
‘*enhance[d] state powers at the expense of federal supremacy”’
(Pet. App. A5S2 (emphasis added)). The Board found, based on
its detailed analysis of the Douglas Amendment’s history and
prior administrative and judicial construction (Pet. App. A65-
A71), that the Amendment constitutes ‘‘a renunciation of
federal interest in regulating the interstate acquisition of banks
by bank holding companies’? (Pet. App. AS2 (emphasis
added)). The Board therefore rejected petitioners’ Compact
Clause challenges.” ‘
e. The Decision Below. Petitioners sought review of the
Board’s orders in the United States Court of Appeals for the
Second Circuit. The Court of Appeals unanimously affirmed,
rejecting all of petitioners’ constitutional objections. (Pet.
App. A21-A33).
The Second Circuit began its analysis with the Douglas
Amendment. The Court of Appeals recognized that Senator
Douglas had stated that the purpose of his amendment was to
‘** ‘permit out-of-State holding companies to acquire banks in
other States only to the degree that State laws expressly permit
them,’ ’’ and that ‘‘ ‘the amendment would leave the way open
for States to make explicit provision for such purchases and
acquisitions if they so decided’ ”’ (Pet. App. A28-A29, quoting
102 Cong. Rec. 6858, 6860 (1956)).
The Court of Appeals observed that under the Douglas
Amendment, no out-of-state bank holding company could
acquire a Massachusetts or Connecticut bank absent the chal-
lenged statutes: It concluded that because the Connecticut and
Massachusetts Acts permitted interstate bank acquisitions that
otherwise would be prohibited under federal law, the Acts
24 The Board also concluded that the Massachusetts and
Connecticut Acts—which ‘“‘involve essentially economic legislation and do
not raise issues of fundamental rights or draw upon _ suspect
classifications’’—were ‘‘rationally related to an attempt to maintain a bank-
ing system responsive to local needs in New England.’’ (Pet. App. A54). The
Board therefore found petitioners’ Equal Protection argument to be without
merit. (Pet. App. AS5S5). The Board apparently found petitioners’ claims
under the Due Process Clause to be too insubstantial to require comment.
9
promote, rather than restrict, interstate commerce. (Pet. App.
A29). The Second Circuit found no support whatsoever for
petitioners’ claims that Congress had intended to restrict the
states’ authority to lift in a selective manner the general federal
prohibition on interstate bank acquisitions imposed by the
Douglas Amendment (Pet. App. A29).
Having recognized that the Douglas Amendment had ef-
fected, with respect to banking, a profound departure from the
notion of a single national economic unit, the Court of
Appeals had no difficulty in disposing of petitioners’ constitu-
tional claims. The Second Circuit held that, while the ability of
states to interfere with interstate commerce ordinarily is limited
by the Commerce Clause, ‘‘if Congress authorizes the states to
regulate,some aspect of interstate commerce’’—as Congress
has clearly done in the Douglas Amendment—‘‘any action
taken by a state within that authority is ‘invulnerable’ to
challenge’ (Pet. App. A30-A31, quoting Western & Southern
Life Insurance Co. v. State Board of Equalization, 451 U.S.
648, 652-53 (1981)). As for the Compact Clause, the Court of
Appeals—like the Board—found no actual agreement or con-
federation of states. It concluded that, even if the Acts were
‘treated as a compact,’’ there is no threat of encroachment
upon ‘‘the just supremacy of the United States’’ that would
violate the Compact Clause (Pet. App. A31-A32). In this
regard, the Second Circuit noted the Board’s conclusion that
the Douglas Amendment constitutes ‘‘a ‘renunciation of fed-
eral interest in regulating interstate acquisitions of banks by
bank holding companies’ ’’ (Pet. App. A29).”°
REASONS FOR DENYING THE WRIT
Petitioners claim that the Connecticut and Massachusetts
Acts raise important issues of federal policy with respect to
interstate banking (e.g., Pet. 9-15). No doubt they do. How-
ever, the policy questions raised by petitioners relate to the
desirability of disparate state approaches to interstate bank
")
25 Finally, the Second Circuit, in rejecting petitioners’ claims under the
Equal Protection Clause, found the Acts to be rationally related to the
legitimate interests of Massachusetts and Connecticut in fostering strong,
locally-oriented banking institutions within those states. (Pet. App. at A33).
10
acquisitions (Pet. 11, 13, 14)—a matter that was resolved by
Congress 28 years ago when it enacted the Douglas Amend-
ment. In any event, the essential consideration here is not
whether the Acts pose important policy questions for Con-
gress, but whether the /egal issues of statutory and constitu-
tional interpretation raised by petitioners are sufficiently
significant to warrant this Court’s review. Those legal issues
are anything but novel or unsettled. This matter presents a
question of statutory interpretation regarding the Douglas
Amendment as to which there is no conflict among the courts
or between judicial and administrative precedents.
In the Douglas Amendment, Congress eliminated a// inter-
state commerce in bank acquisitions as a matter of federal law.
Thus, petitioners’ repeated assertions to the contrary notwith-
standing (e.g., Pet. 9, 16), Congress—not the states—
‘*balkanized’’ the nation for purposes of interstate banking.
Congress also authorized the states to lift the federally-im-
posed barrier to interstate bank acquisitions, as stated by
Senator Douglas himself, ‘‘to the degree’’ that they choose.
The ‘‘expansion of bank holding companies across state lines’’
was considered—in the words of a co-sponsor of the Amend-
ment—to be a ‘‘matter of primary concern to State govern-
ments’’ and ‘‘an area best left to their discretion’’ (see pp. 13,
14, infra).
That Congress intended in the Douglas Amendment to allow
the states to exercise selectively the federally-granted power to
lift the federal barrier to interstate bank acquisitions is sup-
ported by a long line of decisions of the Federal Reserve Board
and the courts. Petitioners have pointed to no contrary prece-
dents, nor do any exist.
Against the background of the Douglas Amendment, the
illusory nature of petitioners’ constitutional claims is apparent.
Under this Court’s established precedents, there is no violation
of the Commerce Clause where, as in the Douglas Amend-
ment, Congress has expressly authorized the states to regulate
a particular aspect of interstate commerce. Nor is there any
conceivable encroachment on federal supremacy in violation of
the Compact Clause, where, as in the Douglas Amendment,
11
Congress has explicitly chosen to defer to state policies. In
short, the decision below is wholly consistent with this Court’s
prior precedents under both the Commerce Clause and the
Compact Clause.
Congress’ power to regulate in an area of interstate concern
by establishing state policy determinations as the norm, rather
than the exception, is beyond dispute. Arguments that a
different approach from that created under the Douglas
Amendment would be preferable should be addressed to Con-
gress, not the judiciary. Under the law as it presently exists, the
legal issues sought to be raised by petitioners do not present
questions of statutory or constitutional construction that call
for review by this Court.
I. Congress In The Douglas Amendment Has Determined
That The States Should Choose For Themselves Whether
And To What Degree The Federal Bar To Interstate Bank
Acquisitions Should Be Lifted.
* Petitioners challenge the Massachusetts and Connecticut
Acts as divisive state action that threatens to ‘‘balkanize’’ the
nation’s banking system and to enshrine inconsistent state
policies. Petitioners’ premise—that the national interest is best
served.by a single national banking unit and a “‘uniform
approach to interstate banking’’ (Pet. 25)—is fundamentally at
odds with the policy judgment made by Congress in the
Douglas Amendment.
1. One of Congress’ purposes in the Douglas Amendment
was to establish a federal prohibition on interstate bank ac-
quisitions, subject to a state’s determination to lift the federal
barrier.”° Senator Douglas explained that, because no state then
had enacted a statute authorizing interstate bank acquisitions,
“the immediate practical effect” of his Amendment would be
“to bar expansion of bank holding companies across state
26 Because the Douglas Amendment was added to the BHC Act on the
Senate floor, its legislative history consists entirely of floor discussion,
principally by its chief sponsor, Senator Douglas of Illinois. A further
discussion of that legislative history appears at pp. 2-3, supra.
12
lines,” unless the states, in their discretion, chose to enact
legislation to lift this bar.”’
Thus, petitioners’ complaint that the Massachusetts and
Connecticut Acts raise the spectre of “balkanization” of bank-
ing is misdirected. Congress in the Douglas Amendment—not
Massachusetts or Connecticut—divided the nation’s banking
system along state lines. The Massachusetts and Connecticut
Acts merely exercise the authority conferred by the Douglas
Amendment to remove the federal barrier to the degree that
those states deemed desirable.
2. Petitioners contend that Congress, in enacting the
Douglas Amendment, was not concerned “with any state
action” that might be taken to remove the federal prohibition
on interstate bank acquisitions (Pet. 17). However, the lan-
guage and the legislative history of the Amendment provide
clear proof that Congress did not intend to limit the states’
policy choices in deciding whether, or to what extent, to
remove the federal barrier.
In presenting his Amendment to the Senate, Senator
Douglas carefully explained that, although no state at that time
authorized interstate bank acquisitions, his “amendment
would leave the way open for states to make explicit provision
for such purchases and acquisitions if they wished to do so.”
Accordingly, the Amendment expressly provided that the Fed-
eral Reserve Board could approve a bank holding company’s
application to acquire a bank located in another state only if
such an acquisition “is specifically authorized by the statute
laws of the state in which [the banking organization to be
acquired] is located, by language to that effect and not merely
by implication.””
27 102 Cong. Rec. 6860 (1956); accord id. at 6861 (remarks of Sen.
Bricker); id. at 6860 (remarks of Senator Bennett).
28 102 Cong. Rec. 6860 (1956); accord id. (remarks of Senator Ben-
nett).
29 =: 12. U.S.C. § $842(d)(1).
13
Senator Douglas repeatedly analogized his Amendment to
the McFadden Act. That federal statute, enacted in 1927 and
amended in 1933, provides that a national bank may establish
and operate branches within the state in which it is situated at
any point outside of the limits of the city, town or village in
which it is situated
if such establishment and operation are at the time autho-
rized to State banks by the statute law of the State in
question by language specifically granting such authority
affirmatively and not merely by implication or recogni-
tion, and subject to the restrictions as to location imposed
by the laws of the State on State banks.”
Senator Douglas explained on the Senate floor that:
[B]y the McFadden Act and other measures, national
banks have been permitted to open branches only to the
degree permitted by State laws and State authorities.
* * *
[W]hat our Amendment aims to do is to carry over into
the field of holding companies the same provisions which
already apply for branch banking under the McFadden
Act—namely, our Amendment will permit out-of-State
holding companies to acquire banks in other States only
to the degree that State laws expressly permit them; and
that is the provision of the McFadden Act.
* * *
[M]y Amendment is in principle almost identical with the
present provision which governs branch banking.”'
Thus, the Douglas Amendment, like the McFadden Act,
reflects a Congressional judgment that, for purposes of bank-
ing, the model of a single national economic unit would not
best serve the national interest. Rather, in the Douglas Amend-
30 12 U.S.C. § 36(c) (emphasis added).
31 102 Cong. Rec. 6858, 6860 (1956) (emphasis added).
14
ment, state law was made controlling for federal purposes, as
had long been true under the McFadden Act.” For this reason,
Senator Douglas noted during the debates that his Amendment
certainly should be supported by “[a]nyone who favors States
rights.”** Similarly, a co-sponsor of the Douglas Amendment
stressed that “control of expansion of bank holding companies
across State lines . . . is a matter of primary concern to State
governments and is an area best left to their discretion
In sum, Congress clearly intended that each state’s own
policy should govern the extent to which, if at all, interstate
bank acquisitions may occur within that state’s borders, not-
withstanding the obvious likelihood that disparate approaches
would result.*> Petitioners’ complaint that the Massachusetts
and Connecticut Acts prevent “a uniform approach to inter-
state bank acquisitions” simply ignores Congress’ judgment
that the states should make their own policy determinations
concerning the federal barrier.”
32 See First Union Bank & Trust Co. v. Heimann, 600 F.2d 91, 99 (7th
Cir. 1979); Hempstead Bank v. Smith, 540 F.2d 57, 59 (2d Cir. 1976).
33 102 Cong. Rec. 6860 (1956).
34 102 Cong. Rec. 6862 (prepared statement of Senator Payne) (empha-
sis added). |
35 This is hardly—as petitioners imply (Pet. 22 & n.31)--a situation in
which Congress’ intent is sought to be derived from “isolated fragments of
legislative history.” New England Power Co. v. New Hampshire, 455 U.S.
331, 342 (1982) (emphasis added) (reliance “on a single statement made on
the floor of the House”). Rather, as partially set forth here, the Senate
debate contains substantial and clear evidence of Congress’ intent in the
Douglas Amendment. This Court has long recognized the significance of
such floor discussion, especially where, as here (see n.26, supra), the
statutory material at issue was added by amendment on the floor and the
relevant floor remarks are by the provision’s sponsors. See, e.g., Lewis v.
United States, 455 U.S. 55, 63 (1980); Federal Energy Administration v.
Algonquin SNG, Inc., 426 U.S. 548, 564 (1976).
36‘ There is no authority for petitioners’ veiled suggestion that Congress
actually intended to preclude the states from differentiating among out-of-
state bank holding companies by state of origin in exercising the powers
conferred upon them by the Douglas Amendment (Pet. 17-18). Petitioners
rely (Pet. 18) upon a June 1955 House discussion of an earlier bank holding
15
li. All Prior Judicial And Administrative Precedents In-
terpreting The Douglas Amendment Recognize That Con-
gress Authorized The States To Be Selective In Lifting
The Federal Barrier To Interstate Bank Acquisitions.
The holdings below of the Federal Reserve Board and the
Second Circuit—that the Douglas Amendment authorizes the
states to be selective in determining the extent to which they lift
the federal bar to expansion by out-of-state bank holding
companies—are entirely consistent with every prior decision of
the Board and those federal appellate courts that have consid-
ered the Douglas Amendment.
1. The Connecticut and Massachusetts Acts, like all but one
of the total of 22 state statutes which have been enacted
pursuant to the Douglas Amendment, lift the federal barrier to
interstate bank acquisitions on a selective basis.’’ The Board,
recognizing that this is precisely what Congress intended by the
Douglas Amendment, has consistently approved acquisitions
under such state statutes.
Until 1972 no state exercised the congressionally-conferred
authority to enact legislation lifting the federal barrier. Then,
lowa enacted the first statute, which allowed the acquisition of
lowa banks only by the single out-of-state holding company
that had owned banks in Iowa prior to January 1, 1971.** The
company bill that did not contain the Douglas Amendment and that was not
enacted. Such material plainly has no relevance for the proper interpretation
of the Douglas Amendment, which was not added to the BHC Act until a
year later on the Senate floor.
Petitioners also note that in 1955 the Senate Subcommittee on Bankjng
heard testimony against an absolute ban in interstate banking and in favor of
“a trade-area approach.” See Control of Bank Holding Companies, 1955:
Hearings on S.800, S.2350 and H.R. 6227 before the Subcomm. of the Sen.
Comm. on Banking and Currency, 84th Cong., Ist Sess. 139-40 (1955). Based
on this fact, petitioners argue that the passage of the Douglas Amendment
proves that Congress rejected the idea of regional banking (Pet. 17 n.21). In
fact, it proves precisely the opposite. Rather than adopting this less restric-
tive regional approach, Congress banned interstate banking entirely, and
gave the states the power to lift the ban if and as they wished.
37 See pp. 4-6, supra.
38 lowa Code Ann. § 524.1805 (West Supp. 1982-83).
16
Board, in approving additional acquisitions by that sole
**grandfathered”’ institution, rejected the argument that ‘‘Con-
gress did not intend to allow the state legislatures to choose
selectively which out-of-state bank holding companies could
enter the state.’’? To the contrary, the Board held that
** “State legislative judgments’ ”’ in the area of interstate bank
acquisitions are determinative.”
Thereafter, the Board has repeatedly approved applications
by out-of-state bank holding companies to acquire or establish
in-state banks whose activities are limited by state law to a
special purpose, such as the issuance of credit cards.*' These
limited purpose bank statutes contain restrictions which pre-
vent banks owned by out-of-state holding companies from
competing with local banks.”
Recently, the Board, whose interpretation of the BHC Act is
entitled to substantial weight,*’ emphasized that, through the
Douglas Amendment, Congress meant to ‘‘allow[ ] the states
39 Northwest Bancorporation, 28 Fed. Reg. 21530, 21531-32 (1973)
(emphasis added), aff'd, lowa Independent Bankers v. Board of Governors,
$11 F.2d 1288 (D.C. Cir.), cert. denied, 423 U.S. 875 (1975).
40 28 Fed. Reg. at 21532. The Board has subsequently upheld other
State statutes that effectively permit acquisitions by only grandfathered
out-of-state bank holding companies. NCNB Corp., 68 Fed. Res. Bull. 54
(1982) (Florida statute that permits only three out-of-state bank holding
companies to acquire additional Florida banks); General Bancshares Corp.,
69 Fed. Res. Bull. 802 (1983) (Illinois statute effectively allowing acquisitions
by only a single Missouri-based bank holding company).
41 Citicorp, 70 Fed. Res. Bull. 431 (1984) (Maryland statute); Citicorp,
68 Fed. Res. Bull. 499 (1982) (Delaware statute); Provident National Corp.,
68 Fed. Res. Bull. 194 (1982) (Delaware statute); Citicorp, 67 Fed. Res. Bull.
181 (1981) (South Dakota statute). Also see p. 5 & n.15, supra.
42 For example, Delaware law prescribes that an out-of-state holding
company may control a Delaware bank only if the bank (1) is ‘‘operated in a
manner and at a location that is not likely to attract customers from the
general public,’’ (2) operates ‘‘no more than a single office located in the
state,’’ and (3) has a minimum of $25 million in capital and surplus and
employs ‘‘not less than 100 persons’’ in the State within one year after
commencing business. Del. Code Ann. tit. 5, § 803 (Supp. 1982).
43 E.g., Securities Industry Ass’n v. Board of Governors, 52 U.S.L.W.
4962, 4964 (U.S. June 28, 1984); United States v. Nat’l Ass’n of Securities
Dealers, 422 U.S. 694, 719 (1975).
17
to apply their own policies regarding interstate banking to the
acquisition by out-of-state bank holding companies of banks
located within the borders of a state.’’ Explaining that it has
‘*consistently construed the Douglas Amendment to authorize
the states to limit or to restrict entry by out-of-state bank
holding companies,’’ the Board recognized that it has ‘‘ap-
proved a number of applications under statutes that admit only
certain bank holding companies or that admit bank holding
companies only under certain circumstances and that exclude
all others.’’*°
In considering the present transactions, the Board stated that
‘*{njothing in the history of the Douglas Amendment suggests
that the states were to be permitted only to choose between not
allowing out-of-state bank holding companies to enter, and
allowing completely free entry.’’” In light of the deference due
to this longstanding and plainly reasonable interpretation of
the Douglas Amendment, further judicial review is unwar-
ranted.
2. Petitioners wholly disregard the fact that the federal
appellate court decisions which construe the Douglas Amend-
ment uniformly give the Amendment the same interpretation
as the Board and the court below.
In Jowa Independent Bankers v. Board of Governors, 511
F.2d 1288 (D.C. Cir.), cert. denied, 423 U.S. 875 (1975), the
District of Columbia Circuit sustained the Board’s approval of
the interstate acquisitions under the Iowa statute described
44 Bank of New York Co., 70 Fed. Res. Bull. 527, 528 (1984); accord
First Bank System, Inc., 70 Fed. Res. Bull. ____, ____, (September 21, !984)
(‘‘the purposes and legislative history of the Douglas Amendment .. .
reflect an intent to preserve the authority of states over the structure of
banking within their borders’’).
45 Bank of New York Co., 70 Fed. Res. Bull. at 528 (emphasis added).
46 (Pet. App. A71). Both before the Board and the Second Circuit
below, petitioners argued that the Douglas Amendment requires a state to
choose between permitting a// out-of-state bank holding companies to ac-
quire banks within its borders or permitting no interstate acquisitions (Pet.
App. A29, A71). This argument having proved unavailing, petitioners have
shifted ground before this Court.
18
above (at p. 15 & n.38). In upholding the lowa statute against
a constitutional challenge, the Court of Appeals rejected the
contention that Congress had restricted the states’ authority
under the Douglas Amendment so that they could only ‘‘ex-
tend the right to acquire in-state banks to all out-of-state bank
holding companies or .. . prohibit such acquisitions en-
tirely.’’*’ The District of Columbia Circuit held that neither the
language nor the legislative history of the Amendment sup-
ported such a restrictive construction. The Court of Appeals in
that case—like the Second Circuit below—held that Congress
had anticipated ‘‘that states might be selective in allowing bank
holding companies to cross state lines,’’ and considered it
‘‘obvious’’ from the legislative history that the Amendment’s
purpose ‘‘was to assure that the states had sufficient power to
control the expansion of bank holding companies across state
lines so that such expansion would not contravene state pol-
icy.’’* Thus, the District of Columbia Circuit in Jowa Inde-
pendent Bankers held that state statutes enacted under the
Douglas Amendment which permit only certain interstate bank
acquisitions will withstand judicial scrutiny.
Last year, in Conference of State Bank Supervisors v.
Conover, 715 F.2d 604, 613 (D.C. Cir. 1983), cert. denied, 104
S.Ct. 1708 (1984), the District of Columbia Circuit reaffirmed
its interpretation of the Douglas Amendment in Jowa Indepen-
dent Bankers, stating ‘‘that the Douglas Amendment empow-
ered states to discriminate among out-of-state bank holding
companies when deciding which could enter.’’” The District of
Columbia Circuit thereby recognized—as it had in Jowa Inde-
pendent Bankers—that Congress intended the states to con-
struct their own answers to the policy questions raised by
interstate bank acquisitions, and for those answers to be
paramount.
The Board’s long-standing view that Congress expressly
authorized the states to lift the federal interstate prohibition in
47 5311 F.2d at 1296.
48 Id. at 1296, 1297 (emphasis added).
49 =715 F.2d at 613.
19
accord with their own particular policies is entirely consistent
with this Court’s discussion of the Douglas Amendment in
Lewis v. BT Investment Managers, Inc. There, the Court
recognized that the Douglas Amendment conferred upon the
states the authority ‘‘to create exceptions to th{e] general
prohibition, that is, fo permit expansion of banking across
state lines where it otherwise would be federally prohibited.’’~°
Massachusetts and Connecticut have simply exercised this
authority to create exceptions to the federal bar by permitting
interstate transactions that otherwise would be federally pro-
scribed. Under these circumstances, no serious constitutional
challenges to Massachusetts and Connecticut Acts can be
maintained.
Ill. There Is No Conflict With This Court’s Prior Commerce
Clause And Compact Clause Precedents.
Under this Court’s established precedents, Congress’ grant
of authority to the states in the Douglas Amendment drains all
substance from petitioners’ claims under the Commerce and
Compact Clauses. Because the Second Circuit so recognized, it
disposed of petitioners’ constitutional objections in short or-
der. Its decision—which is entirely consistent with this Court’s
precedents—does not warrant review.
1. It is well settled that Congress may exercise its plenary
power under the Commerce Clause by conferring upon the
states a power to regulate interstate commerce that they would
not otherwise enjoy.°' Where Congress has done so, ‘‘any
action taken by a state within the scope of the Congressional
authority is rendered invulnerable to Commerce Clause chal-
lenge.’’** In such circumstances, the negative implications of
the Commerce Clause—upon which petitioners base their
50 447 U.S. at 47 (emphasis added in part). Also see n.61, infra.
51 Lewis v. BT Investment Managers, Inc., 447 U.S. at 44; Prudential
Insurance Co. v. Benjamin, 328 U.S. 408, 434 (1946); International Shoe Co.
v. Washington, 326 U.S. 310, 315 (1945).
52 Western & Southern Life Ins. Co. v. State Board of Equalization,
451 U.S. 648, 653 (1981).
20
Commerce Clause challenge (Pet. 14, 21, 23)—do not apply to
the states any more than they do to Congress itself.*’
Last Term, the Court emphasized that ‘‘[t]here is no talis-
manic significance’? to any particular test for determining
when Congress has authorized the states to adopt legislation in
a particular area that would otherwise offend the Commerce
Clause. The essential concern simply is that Congress has
‘‘unmistakably’’ evidenced its intent to do so.™
By opting in the Douglas Amendment for potentially diverse
state policy determinations as opposed to a uniform approach
to interstate bank acquisitions, Congress made clear that the
concept of a single national economic unit has no application
in the area of interstate bank acquisitions.°° To assert—as
petitioners do—that the negative implications of the Com-
merce Clause continue to govern in these circumstances is to
defy the will of Congress.”
53 Id. at 652-53.
54 South-Central Timber, Inc. v. Wunicke, 52 U.S.L.W. 4631, 4633
(U.S. May 22, 1984).
55 See pp. 11-12, supra.
56 Petitioners imply (Pet. 6) that recent legislative proposals concerning
regional interstate banking demonstrate that the Douglas Amendment does
not provide sufficient authority for the state statutes at issue. No such
inference is warranted. In reporting out the bill to which petitioners refer
(which was overwhelmingly approved by the Senate but which was not acted
upon by the House), the Senate Committee on Banking and Currency stated
that it ‘‘believes that the state statutes concerning interstate banking [such as
the Connecticut and Massachusetts Acts] are consistent with both the
constitution and the federal banking statutes. . . .*’ S. Rep. No. 98-560,
98th Cong., 2d Sess. 49 (1984). During the Senate floor debate on the bill,
Senator Garn, the sponsor of the legislation, stressed that this proposal was
“‘merely a clarification of the powers that the States have always retained
under the Douglas amendment,’’ and Senator Tsongas asserted that ‘‘we do
not intend to express or imply any disagreement with the Second Circuit’s
interpretation of the present Douglas amendment . . .’’ 130 Cong. Rec.
11153 (1984) (prepared statements); accord id. at 11154 (Remarks of Sen.
Bentsen noting that many reciprocal interstate statutes were ‘‘tied up in court
due to the opposition of large money center banks’’). In any event, this
Court has long recognized that unenacted legislative proposals do not
provide a reliable guide to the meaning of an existing law enacted by a prior
L. Denee
21
Petitioners nonetheless claim that the Douglas Amendment
does not authorize states to distinguish among out-of-state
bank holding companies on the basis of state-of-origin. Peti-
tioners thereby seek to limit Congress’ authorization of state
legislation in a manner which finds no support in either the
language or the legislative history of the Douglas Amendment.
As the Board and the courts have consistently ruled, the
Douglas Amendment authorizes the states to be selective in
permitting out-of-state bank holding companies to enter.”’
This Court established in Prudential Insurance Co. v. Ben-
jamin, 328 U.S. 408 (1946), that where Congress exercises its
plenary power under the Commerce Clause ‘“‘by removing
obstacles to state action’’ that would otherwise exist, Congress
thereby
put[s] the full weight of its power behind existing and
future state legislation to sustain it from attack under the
commerce clause . . . , subject only to the exceptions
expressly provided for.
328 U.S. at 430-31 (emphasis added). The Massachusetts and
Connecticut Acts are unquestionably within the literal terms of
the Douglas Amendment’s authorization of state legislation in
that Massachusetts and Connecticut have ‘‘specifically autho-
rized’’ interstate bank acquisitions ‘‘by thef[ir] statute laws
. . . by language to that effect and not merely by implica-
tion,’? 12 U.S.C. § 1842(d)(1). Under these circumstances,
Prudential Insurance Co. v. Benjamin requires that petitioners,
in order to prevail in their Commerce Clause challenge, must
demonstrate that Congress, in the Douglas Amendment, ‘‘ex-
pressly provided for’’ specific ‘‘exceptions’’ to its general
authorization and that the Massachusetts and Connecticut Acts
are within such an express exception. Petitioners do not, and
Congress. E.g., City of Milwaukee v. Illinois, 451 U.S. 304, 332 n.24 (1981).
Nor is congressional inaction on such a proposal significant, for Congress
may well have concluded that the existing law is adequate and requires no
revision. See, e.g., American Trucking Ass’ns v. Atchison, T.&S.F. Ry., 387
U.S. 397, 416-18 (1967).
57 See pp. 15-19, supra.
22
cannot, demonstrate the existence of any pertinent exception to
the Douglas Amendment. They argue instead that the Massa-
chusetts and Connecticut Acts are without the authorization of
state legislation contained in the Douglas Amendment in that
the Amendment makes no specific mention of state statutes
which permit interstate bank acquisitions only by bank holding
companies located in particular states (Pet. 19). It is too late in
the day for petitioners to eliminate the requirement that ‘‘ex-
ceptions be expressly provided for’’ which the Court articu-
lated over 38 years ago in Prudential.™*
Following Prudential, this Court recently refused to impose
a limitation on Congress’ grant to the states of authority over
interstate commerce in insurance similar to that suggested by
petitioners in this case. In Western & Southern Life Insurance
Co. v. State Board of Equalization, 451 U.S. 648, 653 (1981),
the Court—in rejecting the argument that the McCarran-
Ferguson Act should be construed so as not to permit a
retaliatory state tax that discriminated among out-of-state
insurers—emphasized that it could find ‘‘no such limitation’’
on the states’ power ‘‘in the language or the history of the
Act.’’ Since Congress had given the states authority to regulate
interstate insurance activity without evidencing any intent to
impose such a limitation, this Court refused to do so.
Quite properly, the court below followed the same course in
rejecting petitioners’ contention that the Douglas Amendment
should be construed so as not to permit the states to distinguish
among out-of-state bank holding companies (Pet. App. A29).
58 Sporhase v. Nebraska, 458 U.S. 941, 959-960 (1982), and New
England Power Co. v. New Hampshire, 455 U.S. 331, 341 (1982), do not
establish, as petitioners claim (Pet. 22), that Congress must expressly author-
ize the precise form of interference with interstate commerce caused by the
challenged state action. Those decisions merely involved savings clauses that
Congress had provided for otherwise valid state laws. The Douglas Amend-
ment obviously cannot be viewed as a mere state law savings clause; among
other things, such a savings clause is expressly set forth in a separate
provision of the BHC Act, 12 U.S.C. § 1846. Nor would it make sense for
this Court to impose a requirement of minute specificity for Congressional
authorizations of state legislation. Such a requirement would serve only to
frustrate legitimate Congressional efforts to remove state action from the
reach of the Commerce Clause.
23
As in the McCarran-Ferguson Act, Congress in the Douglas
Amendment imposed no limitation on the authority it con-
ferred upon the states to alter the federal barrier to interstate
bank acquisitions.”
This case in fact presents even less of a Commerce Clause
issue than any of the Court’s prior decisions sustaining state
legislation enacted pursuant to Congressionally conferred
authority. As the Second Circuit recognized below (Pet. App.
29), the Connecticut and Massachusetts Acts do not restrain
interstate commerce; they promote it. Petitioners’ arguments
to the contrary notwithstanding (Pet. 23), the inescapable fact
is that the Massachusetts and Connecticut Acts permit inter-
state acquisitions—such as the three transactions approved
below by the Board—that otherwise would be prohibited by
federal law. If the Acts were struck down, the Douglas Amend-
ment’s prohibition would be restored in full and no interstate
acquisitions of Connecticut and Massachusetts banks could
occur.”
Thus, in the context of this case, federal law in the form of
the Douglas Amendment—not the state statutes at issue—re-
stricts interstate commerce. All Massachusetts and Connecticut
have done is exercise the authority—‘‘to create exceptions to
th{e] general prohibition’’ on interstate bank acquisitions—that
this Court stated in Lewis v. BT Investment Managers, Inc., was
conferred upon the states by the’ Douglas Amendment.” For
59 Like the Second Circuit below, the District of Columbia Circuit—
the only other circuit to have considered the question—has held that the
Douglas Amendment does not contain any explicit or implicit limitation or
restriction on a state’s power to alter the federally-imposed barrier to
interstate bank acquisitions. Jowa Independent Bankers v. Board of Gov-
ernors, 511 F.2d at 1296-97. The case is discussed in further detail at pp.
17-18, supra.
60 This Court has never held that it is a Commerce Clause violation to
promote interstate commerce that otherwise would not exist at all. The
South-Central Timber decision, upon which petitioners rely (Pet. 23), in-
volved an in-state processing requirement that clearly restricted interstate
commerce. 52 U.S.L.W. at 4631-32.
61 447 U.S. at 47. The Connecticut and Massachusetts Acts clearly
impose no ‘‘restrictions’’ on bank holding company activities beyond those
imposed under federal law by the Douglas Amendment, and thus are in no
24
this reason, the Second Circuit below held ‘‘that the Massachu-
setts and Connecticut statutes do not violate the Commerce
Clause’’ in that ‘‘by enacting the Douglas Amendment, Con-
gress authorized Massachusetts and Connecticut to enact the
statutes challenged here’’ (Pet. App. A31). Because that deci-
sion was entirely consistent with Lewis and this Court’s other
Commerce Clause precedents, there is no need for review by this
Court.
2. There is, if anything, even less justification for review of
petitioners’ Compact Clause claim. Applying this Court’s es-
tablished precedents, the Second Circuit below observed that,
even if the Connecticut and Massachusetts Acts were ‘‘treated
as a compact,’’ the arrangement ‘‘would only violate the
Compact Clause if it were a ‘combination tending to the
increase of political power in the States, which may encroach
upon or interfere with the supremacy of the United States.’ ’’®
Petitioners do not dispute the standard applied by the Second
Circuit; rather, they attack its conclusion that the Massachu-
setts and Connecticut Acts do not ‘‘in any way increase the
political power of the New England states or encroach upon or
interfere with the just supremacy of the United States.’’®
Petitioners contend that the challenged statutes increase the
political power of the New England states in a manner incon-
sistent with federal supremacy in that they omit to permit
non-New England-based bank holding companies to acquire
way at odds with this Court’s further observation in Lewis that ‘‘it is
doubtful’’ that the Douglas Amendment ‘‘authorizes state restrictions of any
nature on bank holding company activities.’ Jd. (emphasis added). In any
event, as the opinion makes clear, the Court was referring to restrictions on
holding company activities permitted under Section 4(c)(8) of the BHC Act,
12 U.S.C. § 1843(c)(8), which relates only to non-banking activities, such as
the trust advisory services at issue in Lewis. The Court clearly was not
speaking to holding company acquisitions of banks, which are regulated
under Section 3 of the BHC Act, 12 U.S.C. § 1842.
62 (Pet. App. A32) (emphasis added) (quoting and citing United States
Steel Corp. v. Multistate Tax Comm’n, 434 U.S. 452, 471 (1978); New
Hampshire v. Maine, 426 U.S. 363, 369 (1976); Virginia v. Tennessee, 148
U.S. 503, 519 (1893)).
63 (Pet. App. A32 (emphasis added)).
25
Massachusetts and Connecticut banks (Pet. 25-26). Nowhere
have petitioners provided the slightest indication of just how
the alleged compact increases the power of Massachusetts and
Connecticut. Although the challenged statutes purportedly
injure petitioners by not allowing non-New England bank
holding companies to acquire Connecticut and Massachusetts
banks, injury to private parties is hardly the same thing for
purposes of the Compact Clause as injury to states. In any
event, it is the pre-existing federally-imposed barrier of the
Douglas Amendment—and not the challenged statutes—that
prevents entry into Massachusetts and Connecticut by non-
New England bank holding companies.
In claiming further that the challenged statutes ‘‘cause inter-
state divisiveness and antagonism’’ (Pet. 25), petitioners ignore
the federal statutory context within which the Connecticut and
Massachusetts Acts were enacted. The Acts have neither
divided the states one from the other, nor have they
‘**prevent[ed] a uniform approach to interstate banking’’ (Pet.
25). That was done by Congress in the Douglas Amendment.
No decision of this Court has ever held that state action—oc-
curring in an area where Congress unmistakeably made poten-
tially disparate state policy determinations paramount—
violates the Compact Clause.™
Petitioners make the sweeping claim (Pet. 27) that the
Massachusetts and Connecticut Acts interfere with federal
supremacy by ‘‘creating a new level of regulation . . . not
provided for by the Congress in its regulation of interstate
banking.’’ This claim is demonstrably inaccurate. Neither Act
creates any new regional or multi-state regulatory authority.
Each state continues to regulate acquisitions of in-state banks
64 Insofar as petitioners claim that the Massachusetts and Connecticut
Acts cause economic injury to states outside New England (Pet. 26), this
Court has previously established that, unless such injury ‘“‘transgresses the
bounds of the Commerce Clause,’’ the federal structure, with which the
Compact Clause is exclusively concerned, is not implicated. United States
Steel Corp. v. Multistate Tax Comm’n, 434 U.S. at 478. Because the
challenged statutes plainly do not offend the Commerce Clause (see pp.
19-24, supra), under United States Steel they also do not violate the Compact
Clause.
26
(and the bank holding companies which own them) using its
own pre-existing regulatory framework and its own banking
regulatory officials.
Petitioners also claim that the Massachusetts and Connecti-
cut Acts create an ‘‘interstate banking system’’ that somehow
‘timpair[s]’’ the federal government’s ‘‘paramount interest in
regulating the interstate expansion of bank holding compa-
nies’ (Pet. 28). It does not. Congress by the Douglas Amend-
ment has exercised its plenary power to regulate interstate
commerce in bank acquisitions by authorizing the states to
determine whether, and to what degree, to permit interstate
bank acquisitions. By exercising this federally-granted author-
ity, Connecticut and Massachusetts cannot reasonably be said
to impair the interest of the federal government in the regula-
tion of interstate bank acquisitions.”
Congress, when it adopted the Douglas Amendment, re-
jected the Senate Banking and Currency Committee version of
the BHC Act which would have allowed the Federal Reserve
Board, rather than the states, to determine the degree to which
interstate bank acquisitions would occur. For this reason, the
65 The only federal interest in regulating bank acquisitions is spelled
out in Section 3 of the BHC Act, 12 U.S.C. § 1842. That provision requires
the Board, before approving a bank acquisition, to consider whether the
acquisition will decrease competition and increase concentration, whether the
acquiring company has the financial and managerial resources to make the
acquisition a success and whether the acquisition will meet the needs of the
communities to be served. 12 U.S.C. § 1842(c). Because the BHC Act
requires Board approval of a// bank acquisitions—whether intrastate or
interstate—these bedrock federal interests cannot be encroached upon by any
state statute enacted under the Douglas Amendment.
Petitioners further claim (Pet. 27 n.43, 28) that the Acts collide with a
failing bank provision of federal law, 12 U.S.C. § 1823(f), added by the
Garn-St Germain Depository Institutions Act of 1982 (the ‘*Garn-St Germain
Act’’). No such clash can occur. The provisions of the Garn-St Germain Act
control, by their express terms, ‘‘[nJotwithstanding [the Douglas Amend-
ment] or any other provision of law, State or Federal... .’” 12 U.S.C.
§ 1823(f)(4)(i). Under this unequivocal assertion of federal supremacy, the
Massachusetts and Connecticut Acts would be pre-empted by federal law
where they would otherwise conflict with the Garn-St Germain Act. See
Fidelity Federal Savings & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 152-53
(1982).
27
Board correctly found below that the Douglas Amendment
should be read as a Congressional ‘‘renunciation of the federal
interest in’’ determining the degree to which interstate bank
acquisitions may occur. Once the Douglas Amendment is
properly understood, no reasonable claim of encroachment
upon federal supremacy may be maintained—as the Second
Circuit found below (Pet. App. A32). Because the Court of
Appeals’ decision in no way conflicts with this Court’s prior
Compact Clause precedents, there is no reason for review by
this Court.”
3. In the final analysis, petitioners’ arguments against the
Massachusetts and Connecticut Acts are premised on the
notion that federal and state barriers to full interstate banking
should be removed. The policy questions petitioners raise have
already been resolved by Congress; they are not /egal issues to
be decided by the Court. Under Article I of the Constitution,
Congress’ judgment in the Douglas Amendment—that the
national interest is best served by permitting the states to
determine for themselves the degree to which interstate bank
acquisitions should be permitted—is determinative. When peti-
tioners’ rhetoric about national economic and political unity is
Stripped away, it is clear that petitioners ask the Court to
review and overturn state statutes—in an area where Congress
has explicitly authorized potentially disparate state policy de-
terminations—simply because those state statutes, and the
congressional authorization pursuant to which they were
enacted, conflict with petitioners’ desires. Accordingly, peti-
tioners have failed to establish any entitlement to review by this
Court.
66 Petitioners’ claim that the Connecticut and Massachusetts Acts are
particularly ‘‘objectionable’’ because they supposedly reflect ‘‘concerted
conduct’ by a ‘“‘group of states’’ (Pet. 21) is entirely beside the point.
Although the Douglas Amendment unquestionably uses the singular tense in
describing state legislative enactments (Pet. 15), nothing in the Amendment’s
language precludes a state from acting with other states, if it chooses, in
lifting the federal prohibition. Petitioners do not, and cannot, point to
anything in the Amendment’s legislative history indicating an intent to
restrict the states’ authority in this regard.
CONCLUSION
For the reasons set forth above, the petition for a writ of
certiorari should be denied.
Respectfully submitted,
WILMOT T. POPE*
CHOATE, HALL & STEWART
60 State Street
Boston, Massachusetts 02109
(617) 227-5020
Counsel for Intervenor-Respondent
Bank of New England Corporation
Of Counsel:
LAURENCE H. TRIBE
Griswold Hall 307
1525 Massachusetts Avenue
Cambridge, Massachusetts 02138
*Counsel of Record
BERTRAM M. KANTOR*
MICHAEL H. BYOwiTz
WACHTELL, LIPTON, ROSEN & KATZ
299 Park Avenue
New York, New York 10171
(212) 371-9200
Counsel for Intervenor-Respondent
CBT Corporation
DOUGLAS M. KRAUS*
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
919 Third Avenue
New York, New York 10022
(212) 371-6000
Counsel for Intervenor-Respondent
Hartford National Corporation
3
APPENDIX
la
Rule 28.1 Statement of Respondents CBT Corporation,
Bank of New England Corporation and
Hartford National Corporation
CBT Corporation, Bank of New England Corporation and
Hartford National Corporation each have no parent compa-
nies, subsidiaries (except wholly owned subsidiaries) or affili-
ates as those terms are used in Supreme Court Rule 28.1.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.