Opposition Brief — Northeast Bancorp, Inc. v. Board of Governors, FRS

Office - Supreme Court, U.S.

FILED

‘) NOV 8 1984

No. 84-363

ee on

CLERK

Iu the Supreme Court of the United States

OCTOBER TERM, 1984

NORTHEAST BANCORP, INC., ET AL., PETITIONERS

v.

BOARD OF GOVERNORS OF THE

FEDERAL RESERVE SYSTEM, ET AL.

&

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE FEDERAL RESPONDENT

IN OPPOSITION

Rex E. LEE

Solicitor General

RICHARD K. WILLARD

Acting Assistant Attorney General

ANTHONY J. STEINMEYER

MICHAEL KIMMEL

Attorneys

Department of Justice

Washington, D.C. 20530

(202) 633-2217

es

ao. ae

7

QUESTIONS PRESENTED

1. Whether Section 3(d) of the Bank Holding

Company Act (12 U.S.C. 1842(d)) authorizes a state

to permit the acquisition of banks within its borders

only by bank holding companies located in certain

regions in the United States.

2. Whether such geographically restrictive state

banking statutes, enacted under the authority of

Section 3(d) of the Bank Holding Company Act, vio-

late the Commerce Clause or Compact Clause of the

Constitution.

(I)

TABLE OF CONTENTS

Page

I ii ctiniensessthincniesiteernsitiesbcibdibabainiidiineiecniaidieiid 1

SUTIIIIIIIIIEN ~ alinsioseschassisdeniteciemapintemnhibeieainsinaimantlindanscatieagitbeniien

SEIT itepihsicernceepernescninitgieepniepaiininieniiibesaisiineniiciaisalinditanninteaiat 2

ES TE en ee ea UI 17

TABLE OF AUTHORITIES

Cases:

Board o v. Investment Company In-

(ED tie, $50. OR, eae et ee ee ae 11

Chevron Oil Co. v. Huson, 404 U.S. 97 _....... 13

City of Philadelphia v. New Jersey, 487 U.S. 617,

Conference of State Bank Supervisors v. Conover,

715 F.2d 604, cert. denied, No. 83-594, (Apr. 2,

1984)

Great Atlantic & Pacific Tea Co. v. C

U.S. 366

Harrison v. PPG Industries, Inc.,; 446 U.S. 578.... 10

Iowa Independent Bankers v. Board of Governors,

511 F.2d 1288, cert. denied, 423 U.S. 875........ 6-7, 10, 15

Lewis v. BT Investment Managers, Inc., 447 U.S.

27 ao G tee

New England Power Co. v. New Hampshire, 455

ERE RIS RSs UE 5 SES IE Oe a 8-9

New Hampshire v. Maine, 426 U.S. 363 _.............. 1l

Prudential Ins. Co. v. Benjamin, 328 U.S. 408........ 5,9

Securities Industry Ass’n v. Board of Governors,

No. 83-614 (June 28, 1984) 00 7,11

South-Central Timber Dev., Inc. v. Wunnicke, No.

Spas (ae Ge ee) 8, 9, 10

Southern Pacific Co. v. Arizona, 325 U.S. 761........ 10

Sporhase v. Nebraska, 458 U.S. 941 8

United States v. Lorenzetti, No. 83-838 (May 29,

) RES TC oe stdin tidiledlanida 16

U.S. Steel Corp. v. Multistate Tax Comm’n, 434

U.S. 452 ii. rn

(mI)

IV

Cases—Continued: Page

Virginia v. Tennessee, 148 U.S. 503 .................---.. 11

Western & Southern Life Ins. Co. v. Board of

Equalization, 451 U.S. 648 -....... sseceeeeDy 9, 11

Constitution and statutes:

U.S. Const. Art. I:

§ 8, Cl.3 (Commerce Clause) .................. 3, 4,5, 10, 14

§ 10, Cl. 3 (Compact Clause) 3, 4, 10, 14

Bank Holding Company Act, 12 U.S.C. 1841 ef.

seq.:

§ 3(a), 12 U.S.C. 1842(a) ro 8

§ 3(c), 12 U.S.C. 1842(c) ......... Ridiscctisslinncisillicicaliis 4.

ETO fe! een passim

1983 Conn. Acts 83-411 (Reg. Sess.) —.................... 2

Ill. Ann. Stat. ch. 17 (Smith-Hurd 1981) :

IRIs este Suuinaien sat 14

§ 2710 14

-Iowa Code Ann. § 524.1805 (West Supp. 1984) ... 14

Mass. Ann. Laws ch. 167A, § 2 (Law. Co-op. 1977

5 3 RADII 2

N.Y. Banking Law § 142-b (McKinney Supp.

1983) - 14

R.I. Pub. Laws S.0661 (1983) RS A IO 3

S.D. Codified Laws Ann. § 51-16-40 (Supp. 1984).. 14

Miscellaneous:

102 Cong. Res. (1956) :

pp. 6856-6863 6

pp. 6857-6858 _................ 10

p. 6858 6

iia: ST san tiatrsresetiniirperiineminniiamseliiehinniiuailinntcls 6

p. 6860 6, 9, 10

NG nee eae | 6

p. 6862 » 6, 10

¥30 Cong. Rec. H10005 (daily ed. Sept. 24, 1984) .. 15

H.R. 2481, 98th Cong., Ist Sess. (1983) -.............. 15

S. 2851, 98th Cong., 2d Sess. (1984) —.....0.02222.. 15

Iu the Supreme Court of the United States

OCTOBER TERM, 1984

No. 84-363

NORTHEAST BANCORP, INC., ET AL., PETITIONERS

Vv.

BOARD OF GOVERNORS OF THE

FEDERAL RESERVE SYSTEM, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE FEDERAL RESPONDENT

IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App.

A21-A33) is reported at 740 F.2d 203. The three

orders of the Federal Reserve Board at issue in this

case (Pet. App. A34-A71, A72-A78 and A79-A87)

are reported at 70 Fed: Res. Bull. 374, 353 and 524.

JURISDICTION

The judgment of the court of appeals was entered

on August 1, 1984. The petition for a writ of certi-

orari was filed on September 6, 1984. The jurisdic-

tion of this Court is invoked under 28 U.S.C. 1254

(1).

(1)

2

STATEMENT

1. Section 3(d) of the Bank Holding Company

Act (BHCA) (12 U.S.C. 1842(d) (the “Douglas

Amendment’) ) generally bars a bank holding com-

pany that has its principal place of business in one

state from acquiring a bank located in another state.

But such interstate transactions are permissible un-

der the Douglas Amendment when “the acquisition

of * * * a State bank by an out-of-State bank holding

company is specifically authorized by the statute laws

of the State in which such bank is located, by lan-

guage to that effect and not merely by implication.”

In late 1982 the Massachusetts legislature enacted

a statute (the “Massachusetts Act”) that permits

the acquisition of Massachusetts banks by out-of-state

bank holding companies.’ The statute contains a sig-

nificant limitation, however: it authorizes such in-

terstate acquisitions only if the acquiring bank hold-

ing company is located in another New England state

(that is, in Connecticut, Maine, Rhode Island, Ver-

mont or New Hampshire).? On June 8, 1983, Con-

necticut enacted a similar statute (the “Connecticut

Act’’),° which authorizes the acquisition of Connecti-

cut banks by holding companies based in the other

1 The Massachusetts Act (Mass. Ann. Laws ch. 167A, § 2)

(Law. Co-op. 1977 & Supp. 1984))is reprinted at Pet. App.

A101-A102.

2 The statute also contains a reciprocity provision: it per-

mits the acquisition of Massachusetts banks by out-of-state

holding companies only when the home state of the acquiring

company grants reciprocal acquisition rights to Massachusetts

bank holding companies.

The Connecticut Act (1983 Conn. Acts 83-411 (Reg.

Sess.) ) is reprinted at Pet. App. A97-A100.

five New England states.* Since the enactment of the

Connecticut Act, statutes authorizing regional inter-

state banking have been enacted in seven states; sim-

ilar statutes have been’ proposed in at least five other

states. See page 12, infra.

2. Following the enactment of the Massachusetts

and Connecticut Acts, three sets of Massachusetts

and Connecticut bank holding companies agreed to

merge.® These companies then applied to the Federal

Reserve Board for approval of the transactions, as

required by the BHCA. See 12 U.S.C. 1842(a). The

applications were opposed by the petitioners in this

case, New York and Connecticut bank holding com-

panies and a Connecticut bank,* which argued that

the Massachusetts and Connecticut Acts authorizing

the acquisitions violate the Commerce (Art. I, § 8,

Cl. 3) and Compact (Art. I, §10, Cl. 3) Clauses of

the Constitution.

The Board nevertheless approved the applications

(Pet. App. AS4-A71, A72-A78, A79-A86). It read

* Rhode Island enacted a similar provision (1983 R.I. Pub.

Laws 8.0661) in May 1983, although the regional restriction

in the Rhode Island act expires on July 1, 1986 (see Pet. App.

A103-A106).

5 Respondent Bank of New England Corporation, a Massa-

chusetts bank holding company, agreed to merge with respon-

dent CBT Corporation, a Connecticut bank holding company ;

respondent Hartford National Corporation, another Connecti-

cut bank holding company, agreed to acquire Arltru Bancorpo-

ration, Inc., a Massachusetts bank holding company; and re-

spondent Bank of Boston Corporation, a Massachusetts bank

holding company, agreed to acquire Colonial Bancorp, Inc., a

Connecticut bank holding company (Pet. App. A22).

* Separate applications were presented to the Board con-

cerning each of the proposed New England transactions. On

appeal, the court of appeals consolidated the challenges to the

three applications (Pet. App. A26-A27).

4

the Massachusetts and Connecticut Acts as falling

within the literal terms of the Douglas Amendment

by “meet[ing] the requirement of express authoriza-

tion for interstate bank acquisitions imposed by sec-

tion 3(d) of the Bank Holding Company Act” (Pet.

App. A37). The Board then concluded that “there is

no clear and unequivocal basis for a determination”

that the Acts are inconsistent with the Commerce or

Compact Clauses (Pet. App. A37, A74-A75, A83).’

The court of appeals upheld the Board’s orders.

The court of appeals reasoned that the Massachusetts

and Connecticut Acts “specifically authorize acquisi-

tions” of in-state banks by out-of-state holding com-

panies and therefore are supported by the Douglas

Amendment (Pet. App. A29). This conclusion dis-

posed of petitioners’ Commerce Clause argument, the

court continued, because “Congress may authorize

the states to enact statutes which may interfere with

interstate commerce” (Pet. App. A380), and “by en-

acting the Douglas Amendment, Congress authorized

Massachusetts and Connecticut to enact the statutes

challenged here” (Pet. App. A81). The court found

the state Acts consistent with the Compact Clause

because the New England banking arrangement does

not “encroach upon or interfere with the just suprem-

acy of the United States” (Pet. App. A32).°

7 The Board also found that the acquisitions met the tradi-

tional competitive, financial and managerial standards set out

in Section 3(c) of the BHCA (12 U.S.C. 1842(c)). See Pet.

App. A41-A48, A75-A78, A80-A86. These determinations are

not challenged here.

8 The court of appeals also rejected a challenge to the Mas-

sachusetts and Connecticut Acts based on the Equal Protection

Clause (Pet. App. A32-A83). That challenge is not repeated

here.

5

ARGUMENT

1. Several propositions that control the analysis of

this case seem clear. In the absence of congressional

authorization, there is little doubt that state restric-

tions on interstate banking such as the ones in this

case would run afoul of the Commerce Clause. See

generally Lewis v. BT Investment Managers, Inc.,

447 U.S. 27, 36 (1980) ; City of Philadelphia v. New

Jersey, 487 U.S. 617, 624 (1978); Great Atlantic &

Pacific Tea Co. v. Cottrell, 424 U.S. 366, 370-371

(1976). Conversely, Congress plainly may authorize

the states to regulate interstate commerce in ways

that otherwise would be inconsistent with the Clause.

See generally Western & Southern Life Ins. Co. v.

Board of Equalization, 451 U.S. 648, 652-653 (1981) ;

Prudential Ins, Co. v. Benjamin, 328 U.S. 408, 427-

432 (1946). Finally, agreements between the states

violate the Compact Clause only if they impinge upon

an interest of the federal government. See U.S. Steel

Corp. v. Multistate Tax Comm’n, 434 U.S. 452, 467

(1978). Thus the principal question in this case is

whether Congress in the Douglas Amendment author-

ized the states to enter into regional banking arrange-

ments.

a. While the issue is not entirely free from doubt,

we believe that the court of appeals correctly an-

swered this question in the affirmative. Petitioners

maintain that the Douglas Amendment should not be

read to authorize state enactments that “discriminate

against or unduly burden interstate commerce” (Pet.

19 & n.24). But as both the Board and the court of

appeals noted, the Massachusetts and Connecticut

Acts appear to fall within the literal terms of the

Douglas Amendment (Pet. App. A29, A37). The

state Acts at issue here plainly are “statute laws”

6

that “specifically authoriz[e]” the acquisition of “a

State bank by an out-of-State bank holding company.”

12 U.S.C. 1842(d). And the state Acts undoubtedly

were intended to authorize the transactions chal-

lenged in this case.

The sparse legislative history of the Douglas

Amendment does not directly address the question

whether Congress intended to authorize the creation

of regional banking arrangements, and therefore does

little to illuminate the meaning of the statutory lan-

guage. “ongressional attention during the debate on

the Amendment * was focused on the provision’s crea-

tion of barriers to interstate banking (see 102 Cong.

Rec. 6862 (1956) (remarks of Sen. Morse); id. at

6861 (remarks of Sen. Bricker); id. at 6860 (re-

marks of Sen. Douglas) ); there was little attention

given to the scope of the power granted states to

overcome those barriers. The relevant discussion

therefore consists in large part of conclusory state-

ments by Senator Douglas to the effect that his

Amendment would “permit out-of-State holding com-

panies to acquire banks in other States only to the

degree that State laws expressly permit them” (id.

at 6858), would “prevent bank holding companies

from expanding across State lines, unless the States

give them explicit permission to do so” (id. at 6859),

or would leave room for the exercise of “State policy”

in the banking field (id. at 6860). But there was no

congressional discussion of the specific types of ac-

tion that the states might or might not take under

the Douglas Amendment.” See lowa Independent

® Because the Amendment was adopted on the Senate floor

(see 102 Cong. Rec. 6856-6863 (1956) ) there is no committee

report to explain the Amendment’s meaning.

10 Petitioners cite congressional statements urging that the

BHCA be applied in a nondiscriminatory way (Pet. 18 n.22).

7

Bankers v. Board of Governors, 511 F.2d 1288, 1296

(D.C. Cir.), cert. denied, 423 U.S. 875 (1975).™

In short, nothing in the legislative history estab-

lishes that the unqualified language of the Douglas

Amendment does not mean what it says. In these

circumstances, the Court should defer to the Board,

which rejected petitioners’ suggestion that the bank

acquisitions challenged in this case were plainly out-

side the contemplation of Congress when it enacted

the Douglas Amendment (see Pet. App. A41, A67).

See Securities Industry Ass’n v. Board of Governors,

No. 83-614 (June 28, 1984), slip op. 8.

b. Petitioners also contend that the Douglas

Amendment should not be read to validate the Mas-

sachusetts and Connecticut Acts because, under this

Court’s holdings, “an Act of Congress should not be

construed to abrogate the limitations imposed on

states by the Commerce Clause unless the federal law

But these statements were not directed to the Douglas Amend-

ment; the cited remarks were made 10 months before the

Amendment was proposed and concerned exceptions to the

regulatory aspects of the bill.

11 This Court’s only discussion of the Douglas Amendment is

equally brief. In Lewis v. BT Investment Managers, Inc., 447

U.S. 27, 47 (1980) (emphasis in original), the Court noted

that “[t]he only authority granted to the States [in the

Amendment] is the authority to create exceptions to th[e]

general prohibition [on interstate banking], that is, to permit

expansion of banking across state lines where it otherwise

would be federally prohibited.” These comments were made in

response to a claim that the Amendment validated state re-

strictions on the non-banking activities of out-of-state bank

holding companies. See ibid. It is impossible to draw from this

discussion, as do petitioners, the proposition that the Amend-

ment does not permit states to “form regional alliances” in

the banking field (Pet. 15-16).

8

unmistakably authorizes the state conduct at issue”

(Pet. 18). The Douglas Amendment fails to provide

such authorization, petitioners assert, because it does

not declare “that states were authorized to discrimi-

nate among their sister states” (Pet. 15). Given the

unusual nature of the challenged arrangements in

this case—which explicitly create combinations of

states that seemingly were designed for the purpose

of excluding other states (see Pet. 4-5 & n.6)—this

argument is entitled to serious consideration.”

Again, however, on balance we believe that peti-

tioners’ contention fails to carry the day.

It is of course true that, as this Court has noted,

“for a state regulation to be removed from the reach

of the dormant Commerce Clause, congressional in-

tent must be unmistakably clear.” South-Central

Timber Dev., Inc. v. Wunnicke, No. 82-1608 (May

22, 1984), slip op. 9. But the decisions in which the

Court has applied this doctrine have little bearing

here. Those decisions came in cases where states

sought to find federal authorization for restrictive

state conduct by looking to federal policy in analogous

areas (e.g., South-Central Timber, slip op. 6-10)” or

by pointing to “standard nonpre-emption clause[s]”

in federal enactments (e.g., Sporhase v. Nebraska,

458 U.S. 941, 959-960 (1982); New England Power

Co. v. New Hampshire, 455 U.S. 3381, 342-343

12 Thus we note that the New England states could have

prevented their banks from being dominated by large out-

of-state bank holding companies (see Pet. 4-5 & n.6) by using

methods that “discriminated” less overtly against other states

qua states—for example, by preventing in-state acquisitions

by bank holding companies over a certain size.

13 In South-Central Timber, Alaska tried to justify restric-

tions on the sale of timber from state lands by pointing to sim-

—

9

(1982)). In such cases the Court has declined to

“rewrite [congressional] legislation based on mere

speculation as to what Congress ‘probably had in

mind.’” Id. at 343 (citation omitted). Taking this

tack assures that Congress “affirmatively contem-

plate[d] otherwise invalid state legislation” when it

took the action said to authorize such state activity.

South-Central Timber, slip op. 9.

Here, however, despite the sparse legislative his-

tory, there is no doubt that the state enactments at

issue fall within the literal language of the Douglas

Amendment. And while Congress did not address in

detail the nature of the authorized activity, it real-

ized that it was allowing the states to involve them-

selves in the regulation of interstate commerce and

that the language of the Douglas Amendment did not

expressly restrict the nature of that regulation. See

102 Cong. Rec. 6860 (1956) (remarks of Sen. Doug-

las); ibid. (remarks of Sen. Bennett). Cf. BT In-

vestment Managers, 447 U.S. at 47.* Accordingly,

there is no reason to believe that the Douglas

Amendment is an insufficiently “clear expression of

ilar restrictions on the sale of timber from federal lands in the

state. The Court concluded that “[t]he fact that state policy

* * * appears to be consistent with federal policy—or even

that state policy furthers the goals we might believe that Con-

gress had in mind—is an insufficient indicium of congressional

intent. Congress acted only with respect to federal lands; we

cannot infer from that fact that it intended to authorize a

similar policy with respect to state lands.” Slip op. 10.

14 Indeed, the Court has read analogous legislation to allow

the states to take action that otherwise would violate the Com-

merce Clause. See, e.g., Western & Southern, 451 U.S. at 653:

Prudential Ins. Co., 328 U.S. at 427-4382.

10

approval by Congress.” South-Central Timber, slip

op. 9.° See Harrison v. PPG Industries, Inc., 446

U.S. 578, 592 (1980).

c. This conclusion should suffice to dispose of peti-

tioners’ Commerce Clause contentions. Congress

“ ‘may redefine the distribution of power over inter-

state commerce’ by ‘permit[ting] the states to regu-

late the commerce in a manner which would otherwise

not be permissible.’” South-Central Timber, slip op.

5, quoting Southern Pacific Co. v. Arizona, 325 U.S.

761, 769 (1945).**° And once “Congress ordains that

the States may freely regulate an aspect of interstate

commerce, any action taken by a State within the

scope of the congressional authorization is rendered

invulnerable to Commerce Clause challenge.” West-

ern & Southern, 451 U.S. at 652-653. Because the

Douglas Amendment authorizes the Massachusetts

and Connecticut Acts, those statutes are immune

from Commerce Clause attack.

d. Petitioners’ Compact Clause argument is simi-

larly unpersuasive. That Clause invalidates “ ‘agree-

18 The breadth of the statutory language has special signifi-

cance in this case. When Congress enacted the Douglas

Amendment, it acknowledged that banking historically has

been a subject of special concern to states and localities, and

it recognized that states always have played a significant role

in the regulation of the banking industry. See 102 Cong. Rec.

6857-6858 (remarks of Sen. Douglas) ; id. at 6860 (remarks of

Sen. Douglas) ; id. at 6862 (remarks of Sen. Morse). See also

lowa Independent Bankers, 511 F.2d at 1296. Given this back-

ground, it would be particularly inappropriate here to search

for implicit limitations in Congress’s unqualified grant of reg-

ulatory authority to the states.

16 We do not understand petitioners to contend that Con-

gress lacks the power under the Commerce Clause to authorize

the creation of regional banking arrangements. See Pet. 21-22.

11

ments that are “directed to the formation of any

combination tending to the increase of political power

in the States, which may encroach upon or interfere

with the just supremacy of the United States.”’”

Multistate Tax Comm’n, 434 U.S. at 471, quoting

New Hampshire v. Maine, 426 U.S. 363, 369 (1976),

in turn quoting Virginia v. Tennessee, 148 U.S. 503,

519 (1893). Here—even assuming that the New

England banking arrangement constitutes a “com-

pact” within the meaning of the Clause—the Massa-

chusetts and Connecticut Acts are in no way incon-

sistent with federal supremacy or “hostile” to “fed-

eral concerns.” Multistate Tax Comm’n, 434 U.S. at

488, 489 (White, J., dissenting). To the contrary,

the Board has interpreted the Douglas Amendment

“as a renunciation of federal interest in regulating

the interstate acquisition of banks by bank holding

companies” (Pet. App. A52). That interpretation

“4s entitled to the greatest deference.’” Securities

Industry Ass’n, slip op. 8, quoting Board of Gover-

nors v. Investment Company Institute, 450 U.S. 46,

56 (1981). And in the absence of any federal inter-

est, a state enactment hardly can threaten federal

supremacy.

2. While the decision below is correct, whether the

Court should grant certiorari nevertheless is a close

question. The issues presented by this case are of

considerable practical importance and are likely to be

raised in other circuits." Their immediate resolution

17 Litigation on the validity of banking regions is likely to

proceed in Circuits other than the Second. As noted above,

banking regions are being created around the nation; peti-

tioner Citicorp, meanwhile, represents that it “has challenged

each interstate bank transaction that has come before the

Board under the purported authority of a regionally restric-

tive statute” (Pet. 11n.14).

12

by the Court might therefore put to rest significant

uncertainties about the future development of the

nation’s banking system. In addition, this case pre-

sents issues concerning the basic relationship of the

states to one another, of the sort that this Court

often has addressed. On balance, however, we believe

that application of the traditional criteria guiding

this Court’s discretionary review should lead to

denial of the petition.

a. The practical importance of the court of appeals’

decision is manifest: if the decision is allowed to

stand (and if it is not modified by legislation) it

might well lead to a significant restructuring of the

banking industry as other states follow the lead set

by the New England states. Florida, Georgia, South

Carolina and North Carolina already have enacted

legislation creating a southeastern banking region

similar to the one established in New England by the

Massachusetts and Connecticut Acts. Utah and Ken-

tucky also have enacted regionally restrictive bank-

ing statutes, and it appears that a number of other

states are considering similar legislation (see Pet.

10-11 & n.13). Furthermore, a number of intra-

region mergers in both the New England and south-

eastern regions already have been announced or pro-

posed (see Pet. 11; Pet. App. A245; Br. of Amicus

Curiae Chase Manhattan Corp. 6-7 n.4). According

to the Board, these trends “suggest that, should the

New England interstate banking zone be upheld, a

system of regional zones may develop involving major

areas of the nation” (Pet. App. A38).

These practical considerations suggest that, if the

Court believes that it eventually will become neces-

sary to address the issues presented here—either

because of their importance, or because of the pos-

13

sibility that a conflict among the circuits will de-

velop—doing so in this case would be wise. It is rea-

sonable to assume that state legislatures and bank

holding companies will rely on the validity of the

Second Cireuit’s decision; if this Court were to

repudiate the court of appeals’ holding in a future

case, a large segment of the banking industry may

well have invested considerable resources in pursuing

constitutionally infirm activity. In such cirecum-

stances, an authoritative decision by the Court in

advance of this widespread activity would be of sub-

stantial public benefit. Furthermore, a ruling con-

trary to that of the decision below necessarily either

would disturb a number of consummated transactions

or, if not made retroactive (see Chevron Oil Co. v.

Huson, 404 U.S. 97, 105-109 (1971) ), would leave in

place an imbalance in the degree of interstate bank-

ing permitted in various states or regions of the

country depending upon fortuities such as the timing

of the authorizing state legislation, of Board action,

and of the consummation of any approved transac-

tions.”

18 It is worth noting, however, that petitioners have offered

no principle that would allow a court to read into the Douglas

Amendment the type of implicit limitation that they contend

for here but would not also call into question the validity of

other state statutes that authorize only a limited degree of

interstate banking. Thus the practical effects of a reversal of

the Second Circuit’s decision would be both narrower and

broader than petitioners suggest. Such a decision would not

increase the flow of interstate commerce; to the contrary, by

limiting the ways in which states could avoid the prohibitory

language of the Douglas Amendment, a reversal would sig-

nificantly curtail the total volume of interstate banking. In

particular, a decision in their favor would not permit peti-

tioners to consummate their planned mergers with or acquisi-

14

b. Despite the importance of this case to the bank-

ing industry, we cannot conclude that further review

is warranted at this time. While the issues raised

are of practical significance, the question presented

involves the meaning of a statute rather than of the

Constitution (see Pet. App. A196-A197, A198-A200

(statements of Paul A. Volcker), A201-A204 (state-

ment of Emmett J. Rice)). Although petitioners

dress their arguments in constitutional clothing,

there is no basic disagreement among the parties

about the meaning of the Commerce or Compact

Clauses; at bottom, this case presents only a rela-

tively straightforward question of statutory inter-

pretation, of the sort that the Court usually does not

decide in the absence of a conflict among the circuits.

Here, of course, no such conflict exists. To the con-

trary, the District of Columbia Cireuit—which ap-

parently is the only court of appeals other than the

Second Circuit that has addressed the nature of the

Douglas Amendment’s authorization of state activ-

ity—has concluded (in the context of an equal pro-

tions of banks in other states (see Pet. 3). Conversely, a hold-

ing that the Douglas Amendment does not authorize state-

imposed restrictions that otherwise would be violative of the

Commerce Clause would open to challenge a range of state

laws in addition to the regionally-restrictive ones in this case—

for example, laws that permit the acquisition of an in-state

bank by an out-of-state holding company only when the home

state of the acquiring company grants reciprocal acquisition

rights to in-state holding companies (see, e.g., N.Y. Banking

Law § 142-b (McKinney Supp. 1983)), or laws that permit

the entry of out-of-state holding companies into a state only

in certain restricted circumstances (see, e.g., Ill. Ann. Stat. ch.

17, §§ 2510, 2710 (Smith-Hurd 1981); Iowa Code Ann.

§ 524.1805 (West Supp. 1984) ; S.D. Codified Laws Ann. § 51-

16-40 (Supp. 1984) ).

15

tection challenge) that “the intent of the Douglas

Amendment was to assure that the states had suffi-

cient power to control the expansion of bank holding

companies across state lines so that such expansion

would not contravene state policy.” Iowa Independ-

ent Bankers, 511 F.2d at 1297. See Conference of

State Bank Supervisors v. Conover, 715 F.2d 604,

613 (D.C. Cir. 1983), cert. denied, No, 83-954

(Apr. 2, 1984) (the Douglas Amendment “em-

powered states to discriminate among out-of-state

bank holding companies when deciding which could

enter”). Our conclusion that there is no present rea-

son to anticipate the development of a conflict among

the circuits is based in substantial part on our con-

clusion that the decision below is correct.

Finally, there is at least a possibility that the ques-

tions presented here will be mooted by legislation.

Congress recently has considered proposals relating

to regional and interstate banking (see Pet. App.

A205-A207 (statement of C.T. Conover) (outlining

legislative proposals); H.R. 2431, 98th Cong., 1st

Sess. (1983) ). Indeed, on September 13, 1984, the

Senate passed a bill (S. 2851, 98th Cong., 2d Sess.)

that would have authorized states to enact regional

bank acquisition legislation for a period of five

years; the House took no action on the provision

before Congress adjourned. There is some indication

that the issue will be considered again in the next

session of Congress (see 130 Cong. Rec. H10005

(daily ed. Sept. 24, 1984) (statement of Rep. St.

Germain) ), although congressional action is far from

assured.

There is little doubt, however, that the issues raised

by petitioners are better suited to legislative than to

16

judicial resolution. As noted, these issues are ones

solely of statutory interpretation. Indeed, this case

is but one aspect of a larger controversy involving

the degree to which interstate banking is desirable

and the methods that might best be used to increase

competition in the banking industry. In deciding this

case, however, the Court, unlike Congress, would be

unable to address the nuances of those issues; its

decision could resolve only the narrow question

whether the Douglas Amendment permits states to

authorize particular types of interstate banking.

And in resolving that question the Court would be

limited to ascertaining the intent of Congress in

1956—at the same time that the current Congress is

considering more recent developments in the banking

industry while grappling anew with the issues pre-

sented by interstate banking. See United States v.

Lorenzetti, No. 83-838 (May 29, 1984), slip op. 11.

These factors lead us to conclude that this case does

not meet the usual criteria justifying a grant of cer-

tiorari. The case presents a narrow, albeit impor-

tant, issue of statutory construction, the issue was

correctly resolved by the court of appeals, there is no

disagreement among the lower courts, and the matter

may well be addressed by new legislation. In these

circumstances, review by this Court is not warranted

at this time.

17

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

REX E. LEE

Solicitor General

RICHARD K. WILLARD

Acting Assistant Attorney General

ANTHONY J. STEINMEYER

MICHAEL KIMMEL

Attorneys

NOVEMBER 1984

W ov. 8. covernment printing orrice; 1984 461531 10064