Petition for Writ of Certiorari — First Fidelity Bancorporation v. Parell

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A ate “fF APR 17 1988

JOSEPH F. SPANIOL, JRG

; 7 CLERK

IN THE i, — .

Supreme Court of the GAnited States

OCTOBER TERM, 1985

FIRST FIDELITY BANCORPORA'TION AND

FIRST FIDELITY BANK, NATIONAL ASSOCIATION,

SOUTH JERSEY,

Petitioners,

MARY LITTLE PARELL, Commissioner of Banking

of the State of New Jersey, et. al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE THIRD CIRCUIT

Of Counsel: EUGENE J. METZGER

(Counsel of Record)

Scorersil SAMUEL SHEPAFD JONES, JR.

poe 5 ne 1275 K Street, N.W.

1275 K Street, N.W. a ae ; .

Washington, D.C. 20005 Washington, D.C. 20005

(202) 289-4520

JOHN D. SCHUPPER Attorneys for Petitioners

STEPHEN N. DERMER

LOWENSTEIN, SANDLER,

BROCHIN, KOHL, FISHER,

BOYLAN & MEANOR

65 Livingston Avenue

Roseland, N.J. 07068

METZGER, SHADYAC &

FRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203 4

QUESTIONS PRESENTED

1. Did the Court of Appeals for the Third Circuit

err in holding that a state court action to enjoin the

merger of two national banks may be pursued in con-

travention of an approval of that merger by the fed-

eral banking authorities and the U.S. Department of

Justice as mandated by The Bank Merger Act of 1966,

12 U.S.C. § 1828(c)?

2. Did the Court of Appeals for the Third Circuit

err in holding that only the state courts may review

a complaint which purports to charge a state cause

of action where the facts stated clearly would support

a federal complaint and are facially deficient under

state law? Stated differently, may a complainant force

parties to litigate purely federal questions in a state

forum until he has run through the state appellate

structure, rendering this Court the first federal forum

wherein the true federal nature of the complaint may

be tested?

LIST OF PARTIES AND

RULE 28.1 STATEMENT

The parties to the proceedings below were the

petitioners herein First Fidelity Bancorporation and

First Fidelity Bank, National Association, South Jer-

sey, and also the defendant-appellees Community

Bancshares Corporation and National Bank and Trust

Conipany of Gloucester County, which are no longer

in existence. Also parties to the proceedings below

are respondents United Jersey Banks, United Jersey

Bank/Southwest, Constellation Bancorporation, The

National State Bank, Horizon Bancorp., Princeton

Bank, New Jersey National Bank, United Counties

Bancorporation, United Counties Trust Company, and

Mary Little Parell, in her capacity as Commissioner

of Banking of the State of New Jersey.

Petitioners First Fidelity Bancorporation and First

Fidelity Bank, National Association, South Jersey,

have no parent companies, non-wholly owned subsi-

diaries or affiliates to list pursuant to Rule 28.1, ex-

cept for The Treasurer, Inc., a non-wholly owned

subsidiary of First Fidelity Bank, National Associa-

tion, New Jersey, which is wholly-owned by First Fi-

delity Bancorporation, and the following affiliates

(with respect to First Fidelity Bank, Nationa! Asso-

ciation, South Jersey):

B:oad & Lombardy Associates, Inc.

Edison Place Holding Company

Fidco, Inc.

ill

First Fidelity Bank, Nationa! Association,

County

First Fidelity Bank, National Association,

New Jersey

First Fidelity Bank, National Association,

North Jersey

First Fidelity Bank, Nationa! Association,

West Jersey

First Fidelity Brokers, Inc.

First Fidelity Capital Corporation

First Fidelity Community Development

Corporation

First Fidelity Financial Corporation

First Fidelity Leasing Corporation

First Fidelity Service Corporation

First Fidelity Tradexport Corporation

First Fidelity Trust, National Association,

Florida

F.N.S.B. I

Rohill Realty Corporation

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED 0o..e.eecccccescecsecccecsecsecsecsecsceseees i

List OF Parties AND RULE 28.1 STATEMENT ....... ii

TABLE OF AUTHORITIES 0.....cccccccccssccceccescesececceeccsceee. iv

CPE TOI snc vsssesiccecazsccanatrsdvesaceceseanaiiccs cts.

PRIN innask antes cueee tee ee ee 2

CONSTITUTIONAL PRovisiIoNs AND STATUTES

OID Ga Gi eesiuadds tsb eciccasendniathicitieinashainsdbiciccestcectencn cece

STATEMENT OF THE CASE ooeeeeeccccccccccccecesecceceeccesceee. 6

REASONS FOR GRANTING THE WRIT ooeccecccccccecccescees. 12

I. The Decision Of The Court Of Appeals Con-

flicts With The Decisions Of Three Other Cir-

cuits And The Express Language Of Section

1828(cX7XB) Of The Bank Merger Act of

SPOT shnsieidtnneidasinsslinaiiasolabanivituduedinanatidcaiuidaticieccsicis 12

II. The Decision Below That The Federal Courts

Do Not Have Jurisdiction To Determine The

Real Nature Of The Plaintiff’s Claim Miscon-

ceives The Federal Courts’ Duty Under Ar-

ticle III, § 2, Of The U.S. Constitution and

28 U.S.C. §§ 1831 and 1441(a) ooo... 19

Ce Re TT een Re a 27

APPENDIX (Opinion and Judgment of Court of -

Appeals and Transcript of Decision of District

RS snlsindibarhentalvulecauiaiateueuie ee la

TABLE OF AUTHORITIES

CASES: Page:

Aetna Casualty & Sur. Co. v. Flowers, 330 U.S. 464

CRETE scikennecinietesecaunnsnnsninsniernesiacnmaeniensseinnantinns 2

American Fidelity Bank & Trust Co. v. Hevmann,

GBB F’.Dd GOO COG Car. TRE) ascissessscscsscesscces. 24

Aveo Corp. v. Aero Lodge No. 785, International

Ass’n of Machinists, 390 U.S. 557 (1968) _ ...... 17

County National Bank v. Board of Governors, 654

F.2d TEES CO Gar. TRB) siccscssssnssescscssecensscs 11, 14

Ellis v. State National Bank of Alabama, 434 F.2d

1182 (5th Cir. 1970), cert. denied, 402 U.S. 973

CITED ccenssnssccssssanassebisrenetiaoncnnseneaearseeannaeanente 21

Federated Department Stores, Inc. v. Moitie, 452 U.S.

DOG CRDBA) kccsasasiscsiccrccocnstccerscistntasaseeninaees 12, 20

Fidelity Federal Savings & Loan Ass’n v. de la

Cuesta, 458 U.S. 141 (19BZ) .........ccccccscssccessess 25

First National Bank of Fairbanks v. Camp, 465 F.2d

586 (D.C. Cir. 1972), cert denied, 499 U.S. 1124

CRDTED — xccconsnssavsarisvacencseseisamninensnteenclanneannecenonnnees 24

First National Bank of Logan, Utah v. Walker Bank

& Trust Co., 385 U.S. 252 (1966) ........... 22, 23

First National Bank in Plant City, Florida v. Dick-

dmoon, S96 U.S. 122 (10GB) ...cccccececccrcscessesseeses 23

Franchise Tax Board v. Construction Laborers Va-

cation Trust, 4638 U.S. 1 (2198S) ..........ccccseceees 17

Franklin National Bank v. New York, 347 U.S. 373

(BOGE) oaceissrsnreivisesinrinssnaisctaseannteenannenssesressrenesten 22

General Investment Co. v. Lake Shore & M.S. Ry.

Co., 260 U.S. 261 (1922) .........ccrsccccssccsesseesees 17, 19

Girard Bank v. Board of Governors, 748 F.2d 838

(Srd Cir. 1984) ..........sccccccoscssseessnsesssrsoscnscceeees 8

Howell v. Citizens First National Bank, 385 F.2d

GOS CSrd Cir. OGD) .nncvececcscsccrccsssessssessensesssesnes 23

Lewis v. BT Investment Managers, Inc., 447 U.S. 27

CRUD rssisincdacesneanicceeienecenariinnenmanae 21

Table of Authorities Continued

Page

Maresse v. American Academy of Orthopaedic Sur-

geons, 470 U.S. __, 84 L.Ed.2d 274 (1985) 18

McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316

GRIPE sseeenninssaveenshcuslpmgiaae ee Uae aaa 22

Mercantile Texas Corp. v. Board of Governors, 638

F.2d 1255 (Gth Cir. 1082) c.cccccsscssscsccscoce 11, 14, 17

Metropolitan Life Ins. Co. v. Taylor, No. 85-686, and

General Motors Corp. v. Taylor, No. 85-688,

petition for writ of cert. granted, 54 U.S.L.W.

auee Gee. Th, GEG cccsmanisiaaaee 12

North Davis Bank v. First National Bank of Layton,

457 F.2d 820 (10th Cir. 1972) .......cccccccccscscee 23

Northeast Bancorp, Inc. v. Board of Governors, 472

Wtvenneny OS ERG DO 218 CIGGE) occcccccccsacersicss, 13

Ramapo Bank v. Camp, 425 F.2d 833 (8rd Cir.), cert.

dented, 400 U.S. 828 (1970) ..ccccccccccccscccsssccecss 24

Rogers v. First National Bank of St. George, 297

F.Supp. 641 (D.S.C.), affd and remanded on

other grounds, 410 F.2d 579 (4th Cir. 1969) 25

State ex rel. Edwards v. Heimann, 633 F.2d 886 (9th

EEN BARR RI 24

- State of Minnesota v. United States, 305 U.S. 382

TRON, -shcaniseteanniclinipeausaasnanoniae eae 19

nited States v. First City National Bank of Hous-

MA, aie, GRR CRW ED sicckssacsnxacenccencccccerscans 13

United States v. Philadelphia National Bank, 374

EE SOUP uedatiaseattaeco ree 21

United States v. Shipp, 203 U.S. 563 (1906) _ ........ 20

United States v. United Mine Workers, 330 U.S. 258

CRORE | <inncceusaeaoaananeeee 20

Vial v. First Commerce Corp., 564 F. Supp. 650

py WN “GEE ntti oe era 14

Washington Mutual Savings Bank v. F.D.I.C., 482

F.2d 459 (Sth Cir. 1978) ..cccccccscascccsercrce, 11, 14, 15

vil

Table of Authorities Continued

Page

CONSTITUTIONAL PROVISIONS:

Article III, § 2, cl. 1 ....cccccceeeeseeeeseeeeeeeeeeeeneeeees 2, 19

STATUTES:

National Bank Act, 12 U.S.C. (passim):

12 U.S.C. § 36(c) (Banking Act of 1933) ..... 23, 24

12 U.S.C. § 214 C ....cccceececceeeeeeeeeeeeeeeeenseneerene eens 3, 21

12 U.S.C. § 215afa) ........eeeeeeees dialect 8, 6, 21

Bank Holding Company Act of 1956, as amended, 12

U.S.C. § 1841 et Sq ........ceeeeees 7, 8, 18, 14, 21, 26

Bank Merger Act, 12 U.S.C § 1828(c), et seq ..... passim

Clayton Act, 15 U.S.C. § 18 .. 5, 13, 14, 15, 17, 21, 26

Employee Retirement Income Security Act of 1974,

29 U.S.C. § 1OG1 et SOQ. ccccceereseeerereeeennnnnneneees 12

Labor Management Relations Act of 1947, § 301, 29

U.S.C. § 185 .cccsssscsssssssseeesseesensenseeenesesnanensensees 17

Sherman Antitrust Act, 15 U.S.C. §§ 1, 2

dike as 4, 5, 10, 18, 15, 16, 17, 26

28 U.S.C. §§ 1331, 1441(a) ...ccceeeeeeeeeeseeeeeeeseees 2. 11, 19

N.J. Stat. Ann. § 17:9A-148 (West 1984) .......... 5, 9, 20

N.J. Stat. Ann. §§ 56:9-4, 56:9-5(oX7) (West 1984) 7

N.J.. Stat. Amn. § 17:9A-345 ...cccscecerseeseeeeentetereeeeees 7

CONGRESSIONAL MATERIALS:

House Report (Banking and Currency Committee),

No. 1221, January 24, 1966, which accompanied

H.R. 12178, 2 U.S. Code Cong. & Admin. News,

at 1860 et seg (1956) — ....cccseeseeseeserreneeesenteeeeeees 15

MISCELLANEOUS:

C. Wright, The Law of Federal Courts (4th ed.

DOES) anacsasercceeses <aiuniadshassilesbciadaysnaatnanatanananminntanen 20

Vili

Table of Authorities Continued

Page

Note, Federal Preem tion, Removal Jurisdiction and

the Well-Pleaded Complaint Rule, 51 U. Chi. L.

ee PE er ee 18

1A Moore’s Federal Practice, § 0.157 ene 18

13B Wright, Miller & Cooper, Federal Practice and

Procedure: Jurisdiction 2d, § 3566 at 105

GRONE | Simninnnonsnmupnidadteduaiuace 18

14A Wright, Miller & Cooper, Federal Practice and

Procedure: Jurisdiction a 18

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1985

No.

First FIpELITy BANCORPCRATION AND FIRST FIDELITY

BANK, NATIONAL ASSOCIATION, SOUTH JERSEY,

Petitioners,

Mary LITTLE PARE_LL, COMMISSIONER OF BANKING OF THE

STaTe OF NEW JERSEY, et. al.,

Respondents.

PETITION FCR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE THIRD CIRCUIT

The petitioners First Fidelity Bancorporation and First

Fidelity Bank, National Association, South Jersey, respect-

fully pray that a writ of ceriiorari issue to review the

judgment and opinion of the United States Court of

Appeals for the Third Circuit entered in this proceeding

on February 14, 1986.

OPINIONS BELOW

The opinicn of the Court of Appeais for the Third Cir-

cuit is reported at 783 F.2d 360 (1986) and is reprinted

in the appendix hereto at page la, infra.

lr ee Ll ee eS

The decision of the United States District Court for the

District of New Jersey (Trenton) (Barry, J.) has not been

reported. It is reprinted in the appendix hereto at page

23a, infra.

JURISDICTION

The opinion of the Court of Appeals was filed on Feb-

ruary 14, 1986. The order denying rehearing and rehea:ing

in bane was entered on March 11, 1986. This Court has

jurisdiction to review the judgment of the Third Circuit

pursuant to Section 1254(1) of Title 28 of the United States

Code. The action of a circuit court of appeals directing a

remand to a state court is reviewable in this court. Aetna

Casualty & Sur. Co. v. Flowers, 330 U.S. 464 (1947).

CONSTITUTIONAL PROVISIONS

AND STATUTES INVOLVED

U.S. Const. art III, §2, el 1:

The judicial Power shall extend to all Cases, in Law

and Equity, arising under this Constitution, the Laws of

the United States, and Treaties made, or which shail be

made, under their Authority; * * *

28 U.S.C. §1331:

The district courts shall have original jurisdiction of all

civil actions arising under the Constitution, laws, or trea-

ties of the United States.

28 U.S.C. §144i(a):

Except as otherwise expressly provided by Act of Con-

gress, any civil action brought in a State court of which

the district courts of the United States have original ju-

risdiction, may be removed by the defendant or the

defendants, to the district court of the United States for

the district and division embracing the place where such

action is pending.

The National Bank Act, 12 U.S.C. §§ 214¢ and 215a(a):

§ 214¢: No conversion of a national banking association

into a State bank or its merger or consolidation with a

State bank * * * shall take place under said sections unless

under the law of the State in which such national banking

association is located State banks may without approval

by any State authority convert into and merge or consol-

idate with national banking associations under limitations

no more restrictive than those * * * with respect to the

conversion of a national bank into, or merger or consoli-

dation of a national bank with, a State bank under State

charter.

§ 215a(a): One or more national banking associations or

one or more State banks, with the approval of the Comp-

troller, * * * may merge into a national banking association

located within the same State, under the charter of the

receiving association. * * *

The Bank Merger Act of 1966, 12 U.S.C. §1828(c):

x* * *

(2) No insured bank shall merge or consolidate with any

ccher insured bank or, either directly or indirectly, acquire

the assets of, or assume liability to pay any deposits made

in, any other insured bank except with the prior written

approval of the responsible agency, which shal] be—-

(A) the Comptroller of the Currency if the acquiring,

assuming, or resulting bank is to be a national bank or a

District bank; * * *

x * *

(4) In the interests of uniform standards, before acting

on any application for approval of a merger transaction,

the responsible agency, unless it finds that it must act

immediately in order to prevent the probable failure of

one of the banks involved, shall request reports on the

competitive factors involved from the Attorney General

and the other two banking agencies referred to in this

subsection. * * *

(5) The responsible agency shall not approve—

(A) any proposed merger transaction which would re-

sult in a monopoly, or which would be in furtherance of

any combination or conspiracy to monopolize or to attempt

to monopolize the business of banking in any part of the

United States, or

(B) any other proposed merger transaction whose ef-

fect in any section of the country may be substantially to

lessen competition, or to tend to create a monopoly, or

which in any other manner would be in restraint of trade,

uniess it finds that the anticompetitive effects of the pro-

posed transaction are clearly outweighed in the public in-

terest by the probable effect of the transaction in meeting

the convenience and needs of the community to be served.

~* *

(7XA) Any action brought under the antitrust laws aris-

ing ovt of a merger transaction shall be commenced prior

to the earliest time under paragraph (6) at which a merger

transaction approved under paragraph (5) might be con-

summated. The commencement of such an action shall stay

the effectiveness of the agency’s approval unless the court

shall otherwise specifically order. In any such action, the

court shal! review de novo the issues presented.

(B) In any judicial proceeding attacking a merger trans-

action approved under paragraph (5) on the ground that

the merger transaction alone and of itself constituted a

violation of any antitrust laws other than section 2 of Title

15, the standards applied by the court sha!l be identical

with those that the banking agencies are directed to apply

under paragraph (5).

compliance with this subsection and after the termination

of any antitrust litigation commenced within the period

prescribed in this paragraph, or upon the termination of

such period if no such litigation is commenced therein, the

transaction may not thereafter be attacked in any judicial

proceeding on the ground that it alone and of itself con-

stituted a violation of any antitrust laws other than section

2 of Tithe 16,°"*

x* * *

(8) For the purposes of this subsection, the term “an-

titrust laws’? means the Act of July 2, 1890 (the Sherman

Antitrust Act), the Act of October 15, 1914 (the Clayton

Act), and any other Acts in pari materia.

* * *

N.J. Stat. Ann. §17:9A-148 (West 1984):

A. As used in subsection B of this section, “applicable

Federal law” means the laws of the United States, as

presently enacted and as hereafter from time to time sup-

plemented or amended, governing the merger or consoli-

dation of a bank organized under State laws into a national

banking association. under the charter of such associa-

eat

B. One or more banks may, without the approval of the

commissioner or any other officer, department, board or

agency of this State, merge into or consolidate with a

national banking association under the charter of such as-

sociation, with the approval of the holders of at least 2/

3 of the capital stock of each such bank entitled to vote.

* ** (A] merger or consolidation authorized by this sub-

section shall be effected solely in the manner and with the

effect provided by applicable Feceral law, and no such

merger or consolidation shall be subject to sections 132

through 147 or to any other law of this State; * * *

STATEMENT OF THE CASE

On January 8, 1985, the National Bank and Trust Com-

pany of Gloucester County (“NB & T’’), a national bank,

entered into an agreement to merge into First Fidelity

Bank, National Association, South Jersey (‘First Fidel-

ity’’), also a national bank, under the Federal charter of

the latter. Under the terms of the merger the shareholders

of NB & T would receive stock in First Fidelity’s parent,

First Fidelity Bancorporation (“‘Bancorporation’’), and NB

& T’s shares would be canceled by operation of law pur-

suant to the statutory merger provisions of 12 U.S.C.

§215a. On April 3, 1985 these banks filed an application

for approval of the merger with the United States Comp-

troller of the Currency (‘‘the Comptroller’’), a division of

the United States Department of the Treasury, as required

by the Bank Merger Act of 1966 (‘‘the Bank Merger Act’’),

12 U.S.C. §1828(c). The Comptroller accepted the filing on

April 15, 1985, established a public file for the proposed

merger, and, as required by the Bank Merger Act, re-

quested reports on the competitive factors involved from

the Department of Justice and the other federal banking

agencies. On May 8, 1985 the Justice Department re-

sponded with respect to the merger, stating in relevant

part:

We have reviewed this proposed transaction

and conclude that it would not have a signifi-

cantly adverse effect on competition.

The Federal Reserve Bank in Philadelphia, on behalf of

the Board of Governors, concluded:

This merger will have no adverse effect on ex-

isting competition in the Philadelphia PMSA, the

market where both banks currently operate. The

market is unconcentrated and will remain so after

the proposed merger. Potential competition will

not be adversely affected because none of the

relevant markets meets all of the criteria for in-

tensive scrutiny. In conclusion, this merger will

have no significant effects on competition.

On May 14, 1985 five large New Jersey banking or-

ganizations—three of whom had theretofore ‘“‘filed formal

protests against the merger”’ with the Comptroller, 783

F.2d at 362, wherein they alleged that the merger would

violate the Bank Merger Act—filed an action in the Su-

perior Court of the State cf New Jersey, Chancery Division

(Burlington County), seeking “an injunction against the

consummation of the merger,”’ 783 F.2d at 364, and a

declaration that New Jersey antitrust and barking ‘aws

‘applied to the merger and that the merger would violate

these laws” (Id.)) Conceding that the merger was subject

to the exclusive jurisdiction of the Comptroller, the com-

plaint contended that the state was not thereby wholly

ousted from jurisdiction because of some asserted bank

holding company involvement.’ Because of the holding

: While the complaint expressly aileged that the Comptroller of the

Currency would subject the proposed merger to review ‘‘to determine

its effects on ... established geographical regions’’ uncer the federal

antitrust laws, the plaintiffs also sought review of the merger under

the New Jersey Antitrust Act, N.J. Stat. Ann. § 56:9-4 (although the

activities of banks were exempted therefrom under § 56:9-5), with re-

spect to different geographical areas: “the State of New Jersey or :ts

specific communities,” (Complaint, Second Count, q5), and under dif-

ferent structural standards, such as the arbitrary statewide cap on

deposits (N.J. Stat. Ann. § 17:9A-345).

° The “involvement” of the holding company apparently arises out of

the use of Bancorporation stock as consideration to the shareholders

of NB & T. Community Bancshares Corporation went out of existence

before the merger took place. Indeed, the Federal] Reserve Board, the

primary regulator of holding company acquisitions, failed to discern any

regulatory role for the Bank Holding Company Act of 1956 in this

merger, despite having only months earlier asserted its appropriate role

in the proposed acquisition of Heritage Bancorporation by Mellon Bank

Corporation, where the parties had tried to oust the Board from ju-

company “involvement,” the Bank Holding Company Act

of 1956, as amended, 12 U.S.C. § 1841 et seg., was asserted

to apply. And since the Bank Holding Company Act ex-

pressly preserved such state law as the states might al-

ready have had with respect to bank holding companies

and their subsidiary banks, the complaint concluded that

antitrust authority enacted by New Jersey subsequeni to

the 1966 enactment of the Bank Merger Act and the

amendment to the Bank Holding Company Act gave the

States authority to apply their own different competitive

standards to bank acquisitions “involving” >olding com-

panies, rather than those mandated for the bank regula-

tory agencies, the Department of Justice and the courts

for all acquisitions of insured banks under the identical

standards in the Bank Merger Act and the 1966 amend-

ment to the Bank Holding Company Act. The complaint

therefore sought to “enjoin” the Commissioner of Banking

of the State of New Jersey from approving ‘‘the acquisition

of’ NB & T by First Fidelity (Prayer, 4E).°

The defendant banks and their corporate parents, also

named as defendants, removed the action to federal court

on June 3, 1985 and simultaneously moved to dismiss for

failure to state a cause of action. The Commissioner, also

named as a defendant, did not join in the removal, al-

though she agreed that the complaint failed to state a

risdiction by reason of the form of the affiliation. See Girard Bank v.

Board of Governors, 748 F.2d 838 (3rd Cir. 1984).

*On May 7, 1985, plaintiffs filed a separate Petition before Com-

missioner Parell, the Commissioner of Banking of the State of New

Jersey, asserting that “the proposed merger will not be in the public

interest as it will result in an undue concentration in the Gloucester

county banking market’’ and suggesting that the Commissioner had

“Jurisdiction” over the merger. Petition at 5. Plaintiffs sought ‘‘an

order convening a plenary hearing on the proposed acquisition’ of NB

& T. Petition, at 6-7. When Commissioner Parell denied the petition

on July 1, 1985, asserting a lack of jurisdiction under New Jersey law,

plaintiffs appealed to the Superior Court of New Jcrsey, Appellate

Division, where it is currently pending.

cause of action under New Jersey law. (Letter from

Attorney General Kimmelman to Judge Barry, July 25,

1985, at 5.) Respondents cross-moved for remand. On July

31, 1985, the District Court, per Judge Maryanne Trump

Barry, denied respondents’ motion to remand and granted

the petitioners’ motion to dismiss. In its Opinion the Dis-

trict Court, inter alia, made the following determinations:

1. “Under the Federal Bank Merger Act, 12 U.S.C.

Section 1828 et seq., neither state law nor state agen-

cies have any authority to regulate or review either

the competitive aspects, ‘the public interest’ or ‘the

convenience and needs of the community to be served’

with respect to mergers resulting in national banks.”

(Opinion, at 31a;]

9. “These standards [12 U.S.C. Section 1828(cX9),

1828(cX7\B) and 1828(c\8) } displace any other stand-

ards or laws, including state laws and thus, the stand-

ard embodied in any other laws, if to the contrary,

must yield to the standards in the Bank Merger Act.”

(Opinion, at 31a;]

3. “(T]here are no applicable standards to the contrary

here ... as explicated by the New Jersey State Leg-

islature in N.J.S.A. 17:9A-148, that mergers into national

banks under national bank charters are beyond the power

of the state to regulate.” [Opinion, at 3la-32a;]

4. “{TJhis is a situation in which the Plaintiffs’ claim

is ‘exclusively governed by Federal law, so that the

[Plaintiffs] necessarily [are] stating a Federal cause of

action,’ although they have couched it in terms of

State law asserted against the merger of national

banks.” Opinion, at 33a; bracketed words are the

Court’s;]

5. “Despite Plaintiffs’ references to state law, it is

the merger of two national banking associations that

Plaintiffs seek to block, and seek it on the face of

their compiaint.”’ [Opinion, at 33a-34a;] and

6. “As Commissioner Parell made clear, she lacks

jurisdiction to act in this matter, which is purely one

of Federal concern.” [Opinion, at 35a. ]

On August 1, 1985, Bank respondents noticed their

appeai of the part of the District Court’s order granting

the motion to dismiss and denying the motion for remand.

While the appeal was pending before the Third Circuit,

the Comptroller issued his approval of the merger, con-

cluding:

We have reviewed this proposal pursuant to the

Bank Merger Act [12 U.S.C. 1828(c) ] and find

that it does not significantly lessen competition

in the relevant market. [Letter of Steven J.

Weiss, Deputy Comptroller for Branch Organi-

zation and Structure, August 29, 1985.]

On September 28, 1985, following the passage of the

30-day waiting period prescribed by the Bank Merger Act,

Section 1828(c\6), the merger of NB & T into First Fi-

delity was consummated. -As a result, NB & T ceased to

exist. Its assets are now owned by First Fidelity.

Counsel for petitioners thereafter in October, 1985 ad-

vised the Third Circuit of the consummation of the merger

and of the provision of the Bank Merger Act that provides

that if, as here, no suit is brought under the Bank Merger

Act within the 30-day waiting period, “the transaction may

not thereafter be attacked in any judicial proceeding on

the ground that it alone and of itself constituted a violation

of any antitrust laws other than Section 2 of Title 15...”

12 U.S.C. §1828(cX7\C).

The case was argued on November 18, 1985. On Feb-

ruary 14, 1986, the Court of Appeals reversed the decision

of the District Court and expressly declined to consider

whether Section 1828(cX7\C) of the Bank Merger Act man-

dated a dismissal of the action as barred by the 30-day

statute of limitations. 783 F.2d at 370 n. 12. It concluded

that an action brought in state court to enjoin on state

antitrust law grounds the merger of two national banks

that concededly was within the jurisdiction of the Comp-

troller of Currency was not within the original jurisdiction

of the federal district court and therefore not removable

to federal court under 28 U.S.C. §1441.

The Court of Appeals held that the case had beer. im-

properly removed to the District Court because respondents

“deliberately chose not to challenge the merger under the

federal law.” 783 F.2d at 363.4 It held that, with respect

to plaintiffs’ antitrust challenge, “Congress has allowed

the states to retain extensive authority to legislate in the

antitrust field.” 783 F.2d at 369. The Court of Appeals

chose to view the Congressionally mandated uniform fed-

eral antitrust standard mandated for ail insured bank

mergers as provided in Section 1828(cX7\XB) of the Bank

Merger Act as not controlling parallel actions in state

courts. Nowhere did it refer to this uniform federal an-

titrust standard, to the legislative history of the Bank

Merger Act, or to the opinions of three other Circuits that

have held the uniform federal antitrust standard to be the

exclusive antitrust standard governing bank mergers and

acquisitions.*

Moreover, although the Court of Appeals saw the Bank

respondents’ conduct as ‘‘yet another tactic,” 783 F.2d at

‘In this respect the Court of Appeals apparently did not deem the

formal protests filed by three of the respondents with the Comptroller,

which expressly argued for the invalidity of the merger under the Bank

Merger Act, as constituting a “challenge [to] the merger under the

federal law.”

‘County National Bank v. Board of Governors, 654 F.2d 1253 (8th

Cir. 1981); Mercantile Texas Corp. v. Board of Governors, 638 F.2d

1255 (5th Cir. 1981); Washington Mutual Savings Bank v. F.D.I.C., 482

F.2d 459 (9th Cir. 1973).

363, and as “attempting to use state law to prevent a

merger between two nationally chartered banks,” 783 F.2d

at 362, it declined to find a case of “artful pleading’’

proscribed under this Court’s ruling in Federated Depart-

ment Stores, Inc. v. Moitie, 452 U.S. 394 (1981). Finally,

the Court of Appeals assumed that the complaint had been

‘“well-pleaded’’ under State law and apparently rejected

any duty to determine the applicability of state law as it

would affect national banks as a matter of federal law.

But is not the first duty of the federal court to determine

its own jurisdiction and not to abandon that question to

a state court where the complaint—plainly raising a federal

question (under the facts stated)—is deliberately silent on

the federal issues?

REASONS FOR GRANTING THE WRIT’

I. The Decision Of The Court Of Appeals Conflicts With

The Decisions Of Three Other Circuits And The Ex-

press Language Of Section 1828(c)(7)(B) Of The Bank

Merger Act Of 1966.

The Court of Appeals apparently saw no incongruity in

a mandated formal review of every bank acquisition by

regulators, the Department of Justice and the courts under

a given set of standards, only to be followed, in the right

case, by another review at a state level under a different

set of standards should a particular state care to try its

hand at the same matter and (to be meaningful) arrive at

a different result.

*On February 24, 1986 this Court granted petitions for certiorari in

Metropolitan Life Ins. Co. v. Taylor, No 85-686, and General Motors

Corp. v. Taylor, No. 85-688, apparently to decide if the Sixth Circuit

erred in holding that a state court claim under an employee benefit

plan covered by federal law, the Employee Retirement Income Security

Act of 1974, 29 U.S.C. §§ 1001 et seg., does not “arise under’ federal

law and, therefore, is not removable to federai court under 28 U.S.C.

§1441. See 54 U.S.L.W. 3548 (Feb. 25, 1986).

The principal error of the Court of Appeals’ decision is

its failure to apply, or even to cite, Section 1828(c\7\B)

of the Bank Merger Act, which establishes a single, uni-

form federal antitrust standard, that of the Sherman and

Clayton Acts, set forth in the Bank Merger Act at 12

U.S.C. § 1828(c\5), for all insured bank mergers (or bank

holding company acquisitions)’ which under the Bank

Merger and Bank Holding Company Acts are subject to

exclusive federal agency and court review.* Subparagraph

(A) of 12 U.S.C. § 1828(c\(5) tracks the language of Section

2 of the Sherman Act, 15 U.S.C. § 2 (barring any proposed

merger ‘‘which would result in a monopoly,” or which

would further a conspiracy or attempt to monopolize the

business of banking in any part of the country). Subpar-

agraph (B) of this paragraph tracks the language of Sec-

tion 1 of the Sherman Act and Section 7 of the Clayton

Act, 15 U.S.C. §§ 1, 18 (barring any proposed merger

‘whose effect may be substantially to lessen competition,

or to tend to create a monopoly, or which ... would be

in restraint of trade.”’) Virtually identical language is con-

tained in section 3(c) of the Bank Holding Company Act,

12 U.S.C. § 1842(c). In addition, the last sentence of sub-

paragraph (B) provides that even a merger where the ef-

fect ‘“‘may be substantially to lessen competition” shall be

approved if the anticompetitive effects are “clearly out-

weighed in the public interest by the probable effect of

the transaction in meeting the convenience and needs of

the community to be served.”” 12 U.S.C. § 1828(cX5XB).

These uniform federal antitrust standards apply with

respect to ‘‘any judicial proceeding,’’—a phrase not limited

* The Bank Holding Company Act of 1956, 70 Stat. 133, as amended,

12 U.S.C. §1841 et seq., regulates the acquisition of state and national

banks by bank holding companies. See generally Northeast Bancorp,

Inc. v. Board of Governors, 472 U.S._—, 86 L.Ed.2d 112, 118 (1985).

* See United States v. First City National Bank of Houston, 386 U.S.

361 (1967).

to cases brought in federal court--under ‘“‘any antitrust

laws’’—a phrase not limited to federal antitrust laws, but

rather encompassing ‘‘any other Acts in pari materia.” 12

U.S.C. §1828(cX8).°

The exclusivity of the identical federal standard embod-

ied in both 12 U.S.C. §1828(cX5) (the Bank Merger Act)

and 12 U.S.C. §1842(c) (the Bank Holding Company Act)

is well traveled judicial ground and, until this case, had

never been put into doubt. For example, in Mercantile

Texas Corp. v. Board of Governors, 638 F.2d 1255 (5th

Cir. 1981), the Federal Reserve Board had attempted to

justify the application of a different competitive standard

from that found in §1842(c). The Fifth Circuit disagreed:

The phrase ‘‘substantially to lessen competition”

is, of course, borrowed from Section 7 of the

Clayton Act. ... Because this repetition was pur-

poseful, [note omitted] the principles developed

under the Clayton Act are applicable to mergers

of bank holding companies under Section 1842(c)

... aS well as to mergers of banks under Section

1828(cX5\XB) of the Bank Merger Act, which uses

the same language... . [Jd., at 1260-61]

Two other Circuits and one other district court have

also upheid the exclusivity of this statute. County National

Bank v. Board of Governors, 654 F.2d 1253 (8th Cir. 1981):

Washington Mutual Savings Bank v. F.D.I.C., 482 F.2d

459 (9th Cir. 1973); Vial v. First Commerce Corp., 564 F.

Supp. 650 (E.D. La. 1983). The Vial case dealt with an

* Thus, the Court of Appeals plainly erred when it concluded: “the

law with respect to bank mergers is no more ‘exclusively’ federal than

was the law with respect to interstate transmission of natural gas.”

783 F.2d at 368. The whole purpose of the 1966 Bank Merger Act and

its companion, the 1966 amendment to the Bank Hoiting Company Act,

was to establish an exclusive and uniform federal standard. See fn. 11.

infra.

identical corporate restructuring as that involved in this

case and an almost identical claim of state authority.

In Washington Mutual Savings Bank v. F.D.1.C., supra,

the Ninth Circuit made a careful analysis of the historical

background that gave rise to enactment of the Bank

Merger Act. It found that Congress intended that bank

mergers be carved out for special treatment, by establish-

ing an unusual scheme of review which required compre-

hensive competitive reports from not only the Attorney

General, but also from the two federal banking agencies

not directly responsible for the supervision of the surviving

institution. The Circuit Court found that this system in-

sured uniformity and avoided a particular agency's being

too lenient or too strict toward bank affiliations. Signifi-

cantly, the Court also recognized that while Congress in-

corporated application of the standards of antitrust laws

(i.e., the Sherman and Clayton Acts) to bank mergers, it

also made an exception to the prescriptive application of

those laws by permitting a merger which violated the an-

titrust laws, where the ‘‘convenience and needs of the

community to be served’ outweighed the anticompetitive

effects.

The Congress plainly understood that by enacting the

Bank Merger Act it was creating an exclusive federal rem-

edy:

(a) ‘‘The bill would establish a single set of standards

for the consideration of future mergers by the banking

supervisory agencies, the Department of Justice, and the

courts under the antitrust laws ... [2 U.S Code Cong. &

Admin. News at 1860 (1966).]’°

(b) ‘The bill ... would exempt mergers consummated

under the new standards and procedures from attack

12173. whose text was enacted into law.

thereafter under any provision of the antitrust laws except

the antimonopoly provisions of section 2 of the Sherman

Act.” [Id.]

*-_* *

standards of the bill in all cases instituted under the an-

titrust laws...” [Jd at 1861.]

*_* *

(d) ‘[TJhis [federal] rule of law is to be applied uni-

formly, in judicial proceedings as well as by the admin-

istrative agencies.” [Jd at 1862.]

~_* *

(e) ‘‘The bill provides that the courts having jurisdiction

over these cases must apply the new standards set forth

in paragraph (5) to be applied to all future mergers.” [/d

at 1863.]

*~* *

(f) Paragraph 7 ‘‘provides a special statute of limitations

for antitrust actions, other than those based on the an-

timonopoly section (sec. 2) of the Sherman Act, arising

out of an agency-approved bank merger. Any such action

must be commenced during the waiting period (normally

30 days] provided in paragraph (6}.”’ [Jd at 1865.]

** *

(g) “‘Subparagraph (B) requires the courts, in adjudicat-

ing the propriety of any merger transaction, to apply the

same rule of law that paragraph (5) directs the responsible

agencies to apply when initially passing on the question.”’

{Id.]

~_* *

(h) ‘For convenience and precision of reference, [para-

graph (8) ] defines the term ‘‘antitrust laws’’ as the Sher-

man Act, the Clayton Act, and any other acts in pari

materia.”’ [Jd at 1865.}"

Because it failed to mention Section 1828(cX7\B) of the

Bank Merger Act or its legislative history, or even to cite

the decisions cited above from the other Circuits, the Court

of Appeals was not able to apply correctly the controlling

Supreme Court removal precedents, Franchise Tax Board

uv. Construction Laborers Vacation Trust, 463 U.S. 1 (1983),

and Avco Corp. v. Aero Lodge No. 735, International Ass’n

of Machinists, 390 U.S. 557 (1968), affg, 376 F.2d 337

(6th Cir. 1967). In Franchise Tax Board this Court indi-

cated that removal is proper ‘“‘if a federal cause of action

completely preempts a state cause of action [because] any

complaint that comes within the scope of the federal cause

of action necessarily ‘arises under’ federal law.”’ 463 U.S.

at 24. In Avco this Court identified the field of labor law

as one in which the federal interests expressed in the

Labor Management Relations Act of 1947, Section 301, 29

U.S.C. §185 (1982), empowered the courts to create a body

of federal law, thus prompting the need for a federal

forum.

The federal antitrust laws are another field in which

the need for a federal forum has long been recognized by

this Court. Since 1922 this Court has mandated that the

meaning and application of the Sherman and Clayton Acts’

standards shall be within the exclusive province of the

federal courts. General Investment Co. v. Lake Shore &

M.S. Ry. Co., 260 U.S. 261 (1922). This admonition was

! The language of the antitrust standard in the Bank Holding Com-

pany Act follows that of the Bank Merger Act. Mercantile Texas Corp.

v. Board of Governors, 638 F.2d 1255, 1260 n. 4 (1981X‘‘We may rely

on the legislative history of the [1966] amendment to the Bank Merger

Act as equally expressing congressional intent as to the construction

and purposes of the Bank Holding Company Act amendment [§1842(c),

adopted in 1966 as an amendment to the Bank Holding Company Act.”’}

See Pub L. No. 89-485, §7, 80 Stat. 237 (1966).

reaffirmed as recently as one year ago in Maresse v. Amer-

ican Academy of Orthopaedic Surgeons, 470 U.S. __, 84

L.Ed.2d 274, 281 (1985) (‘{FJederal antitrust claims are

within the exclusive jurisdiction of the federal courts.’’)

Since any cause of action involving the federal antitrust

laws is “within the exclusive jurisdiction of the federal

courts,’’ removal (followed by dismissal) was required.

Thus, the District Court was correct when it “‘held that

no antitrust challenge to a merger between national banks

could be stated under state law.” 783 F.2d at 364.

Plaintiffs below did not have the right to “‘choose not to

assert a federal law that is available and rely only on state

law....’’ 783 F.2d at 365 (quoting 14A Wright & Miller

§3722). As Wright and Miller also states: ‘‘Some federal

statutes have so strong a preemptive effect that they do

more than merely provide a defense to a state law claim.

Instead federal law is considered to have taken over an

entire subject matter and made it inherently federal.’’ 13B

Wright & Miller §3566 at 105 (1984). Stated another way,

“if federal law occupies the field, all state law in that field

is displaced whether or not it impairs federal law, and any

cause of action within that field must be tested under

federal law.’ Note, Federal Preemption, Removal Juris-

diction, and the Well-Pleaded Complaint Rule, 51 U. Chi.

L. Rev. 634, 665 (1984) (This Note was cited with approval

by the Court of Appeals, but its reasoning was misapplied.)

Since the Bank respondents chose to enjoin the merger

of twe insured national banks, they necessarily raised a

federal claim, particularly as the state expressly disclaimed

authority. The District Court below thus was obliged to

dismiss the action after removal. “T]he principle of de-

rivative jurisdiction, as it pertains to subject-matter juris-

diction of the state court, has been applied so that any

action, commenced in a state court, involving a matter

over which the federal courts have exclusive jurisdiction,

is subject to dismissal, after removal, for want of juris-

diction .... 1A Moore’s Federal Practice, §0.1 57[3.-2], em-

phasis in original, citing State of Minnesota v. United

States, 305 U.S. 382 (1939), and General Investment Co.,

v. Lake Shore & M.S. Ry Co., supra.

II. The Decision Below That The Federal Courts Do

Not Have Jurisdiction To Determine The Real Na-

ture Of The Plaintiffs’ Claim Miscenceives The Fed-

eral Courts’ Duty Under Article III, §2, Of The U.S.

Constitution And 28 U.S.C. §§1331 And 1441(a).

The Court of Appeals appears to hold that if the com-

plaint does not recite a federal claim (even though a federal

claim inheres in the facts stated), the case may not be

removed even if the facts stated will not support an ad-

ditional state cause of action (e.g., where expressly barred

by state law, as here). The court presumed without dis-

cussion that the plaintiffs’ claims were ‘‘well-pleaded,”’ ap-

parently because it thought it had to let ‘‘the state court

... make the determination as to the applicability of its

state law.”’ 783 F.2d at 367.

But this argument would permit any complainant to

force parties to litigate purely federal questions in a state

forum at least through the state system once before being

forced into the appropriate federal forum. It would require

this Court to be the first federal forum to review the

federal question. Surely such an approach makes no sense

in terms of judicial economy. The alternative course would

be to permit removal, when there is a federal cause arising

out of the facts, to test whether these facts would also

support a state claim. If a claim that states a federal cause

would not withstand a motion to dismiss the asserted state

claim, it was properly removed.

The Court of Appeals’ approach conflicts with this

Court’s own removal precedents and ignores over 150 years

of opinions of this Court establishing the rule of Congres-

sional authority over national banks.

A. Where a question as to a “ederal court’s jurisdiction

turns on whether a state court has jurisdiction as well,

the federal court has both the jurisdiction and the duty

to resolve the issue of state court jurisdiction. Thus, it is

often said that the federal courts have ‘‘jurisdiction to

determine jurisdiction.”’ C. Wright, The Law of Federal

Courts, § 16 (4th ed. 1983). This Court so ruled in United

States v. United Mine Workers, 330 U.S. 258, 290 (1947),

citing with approval United States v. Shipp, 203 U.S. 563,

573 (1906). In this case the Court of Appeals had juris-

diction to decide if the state claims were artfully pled (they

were) and if the relevant state statutes expressly deferred

to federal law (they do).

1. In Federated Department Stores, Inc. v. Moitie, 452

U.S. 394 (1981), the plaintiff was deemed by the Court to

have sought to plead a federal antitrust claim in the form

of a state law claim, so as to avoid removal to federal

court. This Court ‘‘agree[d] [with the lower federal courts]

that at least some of the claims had a sufficient federal

character to support removal. As one treatise puts it,

courts ‘will not permit plaintiff to use artful pleading to

close off defendant’s right to a federal forum...’ 452 U.S.

at 396-97 & n.2. Obviously, in Moitie this Court did not

suggest that it had no jurisdiction to determine the appl-

icability of the purported state law claims.

2. A key part of the New Jersey banking law that

plaintiffs sued upon below is N.J. Stat. Ann. § 17.9A-148,

which states in relevant part: ‘“‘a merger or consolidation

authorized by this subsection shall be effected solely in the

manner and with the effect provided by applicable Federal

law, and no such merger or consolidation shall be subject

to sections 132 through 147 or to any other law of this

State.’’ (emphasis added.) While the Third Circuit paid lip

service to the point that “the state banking laws do not

grant the Commissioner of Banking any authority to reg-

ulate mergers between national banks,’’ 783 F.2d at 364

n.8, it seemed to suggest that the statute might be deemed

by a state court not to apply if the state court found that

‘the esse ace of this transaction is an acquisition and thus

that the New Jersey Bank Holding Company Act applies.”

783 F.2d at 369. But this reasoning is flawed in two crit-

ical respects. First, since the state law draws a jurisdic-

tional line between state and federal jurisdiction at the

point required by federal law (see 12 U.S.C. §§ 214c¢ and

215a(a),!* the District Court, not the state court, was

obliged to resolve any factual question as to the nature

of the transaction that would determine whether state or

federal law applied, so as to resolve the issue of its own

jurisdiction.’* Second, even if ‘‘an acquisition’ had been

involved, that fact would not eliminate the same federal

question—whether the ‘‘acquisition’”” met the federal an-

titrust test contained in the federai Bank Holding Com-

pany Act. Whatever the remaining utility of state law

under Section 7 of the Bank Holding Company Act, 12

U.S.C. § 1846 cannot be deemed to vermit state law that

conflicts with the Bank Holding Company Act itself. Lewis

v. BT Investment Managers, Inc., 447 U.S. 27, 49 (1980)

(suggesting that “‘ ‘a state could not enact legislation in-

consistent with the [Act] and therefore nullify its effect.’ ’’)

Thus, since the Bank Holding Company Act contains the

same federal antitrust test as that in the Bank Merger

? Thus, a national bank may not merge with a state bank under state

charter unless the state allows unfettered merger between a state bank

and national bank under the national bank’s charter. Ellis v. State

National Bank of Alabama, 434 F.2d 1182 (5th Cir. 1970), cert. denied,

402 U.S. 973 (1971).

In any case the claim that the transaction was an acquisition of

bank stock was wholly without merit. As the Third Circuit acknowl-

edged, the stock of NB & T never changed hands. 783 F.2d at 362.

It remained the property of its shareholders, insofar as it has physical

substance. As an indicium of ownership it was cancelled by operation

of law. In United States v. Philadelphia National Bank, 374 U.S. 321

(1963), this Court drew the distinction between mergers and stock

acquisitions clearly. In summarizing the pre-1950 case law regarding

Clayton Act, §7, this Court said: ‘“‘But the courts found mergers to be

beyond the reach of § 7, even when the merger technique had sup-

planted stock acquisitions as the prevaient mode of corporate amal-

gamation.”’ 374 U.S. at 338-39.

Act, it could not matter here whether the transaction was

structured as a merger or ar acquisition. Under either

method the federai antitrust law applies, and since the

federal courts have exclusive jurisdiction over the federal

antitrust laws (see discussion at pages 17-18, supra), the

action was for that reason removable.

B. The national banking system, since the seminal case

of McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819),

has been deemed by this Court to be a “part of the

supreme law of the land,” Jd. at 424, which cannot be

regulated by the states except to the degree and extent

that Congress permits. “[T]he authority of Congress to act

in the [banking] field was resolved in the landmark case

of McCulloch v. Maryland ... [and] [t]he paramount power

of the Congress over national banks has, therefore, been

settled for almost a century and a half.’’ First National

Bank of Logan, Utah v. Walker Bank & Trust Co., 385

U.S. 252 (1966). In Franklin National Bank v. New York,

347 U.S. 373 (1954), the Supreme Court stated:

[T]he Federal Government is a rival chartering

authority for banks. Since M’Culloch v. Maryland

(U.S.) 4 Wheat. 316, 4 L.ed. 579, it has not been

open to question that the Federa] Government

may constitutionally create and govern such in-

stitutions within the states. The United States

has set up a system of national banks as federal

instrumentalities to perform various functions

such as providing circulating medium and gov-

ernment credit, as weil as financing commerce

and acting as private depositaries. [347 U.S. at

375.]

The role of the states with respect to national banks is

limited to that which Congress has prescribed. As the

Supreme Court stated in Franklin National Bank, supra,

347 U.S. at 378:

inate

We find no indication that Congress intended to

make this phase of national banking subject to

local restrictions, as it has done by express ian-

guage in several other instances.

The supremacy of Congress over the affairs of national

banks was reiterated in First National Bank in Plant City,

Florida v. Dickinson, 396 U.S. 122 (1969), a case con-

cerning the applicability of a state branching law." It

stated:

At the outset we note that, while Congress

has .absolute authority over national banks, the

federal statute has incorporated by reference the

limitations which state law places on branch

banking activities by state banks.

* * *

...[T]Jhe threshold question of [defining the term

“branch’’] is to be determined as a matter of

federal law. ... (896 U.S. at 131, 134.]

In Howell v. Citizens First National Bank, 385 F.2d 528,

530 (8rd Cir. 1969), a state banking commissioner sued to

enjoin a national bank from operating a second branch in

a community, alleging that opening the branch violated

state law that was applicable to national banks. When the

District Court stayed the proceedings pending institution

of a suit in state court to determine the applicability of

the state law, the Third Circuit reversed, holding that the

applicability of the state law was purely a matter of federal

14 State restrictions on branch banking ty national banks are based

upon express Congressional! authority pursuant to the McFadden Act,

12 U.S.C. §36(c). See First National Bank of Logan, Utah v. Walker

Bank & Trust Co., supra. Application of those state restrictions 1s

purely a federal question removable to federal court. See, e.g., North

Davis Bank v. First National Bank of Layton, 457 F.2d 820 (10th Cir.

1972).

law. Referring to 12 U.S.C. §36(c), adopted by the Banking

Act of 1933, the Third Circuit held:

Thus the determination of the extent of the ap-

plication of a state branch banking statute to a

national bank under the federal Banking Act of

1933 is purely a question of federal law, a ques-

tion to be decided by reading the state statute

through lenses prescribed by the Congress. [385

F.2d at 530.]

It concluded:

It will thus be seen that the present case in-

volves a purely federal question, the meaning of

the New Jersey braneh banking statute for the

purposes of clause (2) of paragraph (c) of Section

5155 of the Revised Statutes, as amended, and

under the interpretive criteria laid down in that

clause... The question is accordingly one which

the district court should proceed to consider and

decide, and as to which its abstention in favor

of the state courts is not appropriate. [385 F.2d

at 531.]

The supremacy of federal banking law and its federal

administrators, such as the Comptroller, with respect to

state banking laws as they affect national banks has been

acknowledged in many recent cases. See e.g., Ramapo Bank

v. Camp, 425 F.2d 333, 346 (8rd Cir.), cert. denied, 400

U.S. 828 (1970) (state law restrictions do not govern the

nor:-branching functions of national banks); First National

Bank of Fairbanks v. Camp, 465 F.2d 586, 595, 597 (D.C.

Cir. 1972), cert. denied, 409 U.S. 1124 (1978) (‘{T]here is

authority for the view that the Comptroller’s interpretation

of the state statute is, under Section 36, purely a question

of federal law’’); State ex rel. Edwards v. Heimann, 633

F.2d 886, 890 (9th Cir. 1980) (‘The Comptroller makes an

independent interpretation of the state law’’); American

Fidelity Bank & Trust Co. v. Heimann, 683 F.2d 999,

1005 (6th Cir. 1982) (‘The Comptroller was required to

make an independent determination of the meaning of the

applicable state law’’); Rogers v. First National Bank of

St. George, 297 F. Supp 641, 645 (D. S.C.) (The merger

of two national banks “‘is governed and controlled by the

applicable Federal Statutes and regulations, not by State

law,’’) affd and remanded on other grounds, 410 F.2d 579

(4th Cir. 1969).

And in Fidelity Federal Savings and Loan Ass’n v. de

la Cuesta, 458 U.S. 141 (1982), in which this Court held

that a Federal Home Bank Board regulation authorizing

due-on-sale clauses in federal savings and loan instruments

preempted state laws imposing limitations on the due-on-

sale practices of federal savings and loan associations, the

Court stated:

The pre-emption doctrine, which has its roots

in the Supremacy Clause, U.S. Const., Art VI,

cl]. 2, requires us to examine congressional intent.

Pre-emption may be either express or implied,

and ‘is compelled whether Congress’ command

is explicitly stated in the statute’s language or

implicitly contained in its structure and purpose.’

Jones v. Rath Packing Co. 430 U.S. 519, 525

(1977). Absent explicit pre-emptive language,

Congress’ intent to supersede state law alto-

gether may be inferred because ‘‘[t]he scheme of

federal regulation may be so pervasive as to make

reasonable the inference that Congress left no

room for the States to supplement it,”’ because

“the Act of Congress may touch a field in which

the federal interest is so dominant that the fed-

eral system will be assumed to preclude enforce-

ment of state laws on the same subject,” or

because ‘“‘the object sought to be obtained by fed-

eral law and the character of obligations imposed

by it may reveal the same purpose.” Rice v Santa

Fe Elevator Corp., 331 U.S. 218, 230 (1947). [458

U.S. at 152-53.]

It is readily apparent that the Court of Appeals, un-

wittingly, has done much more than merely mistakingly

remand a case to state court. It has held that the states

may regulate (or forbid) the merger of national banks—

an activity heretofore subject to exclusive Congressional

control. It has held that different antitrust standards—

conceivably 50 different antitrust standards—from those

of the Bank Merger and Bank Holding Company Acts can

govern the amalgamation of insured banks. Finally, it has

heid that the Sherman Act and Clayton Act standards of

the Bank Merger and Bank Holding Company Acts can

be—perhaps—interpreted and applied by 50 different state

court systems. These holdings are more than a departure

from prior opinions of this Court. They represent a dis-

mantling of the supremacy of the laws of the United States

in the fields of national banking and federal antitrust pol-

icy.

ee ae ee eee Oe Te ee ee ee

CONCLUSION

For the foregoing reasons, this petition for a writ of

certiorari should be granted.'®

Respectfully submitted,

Of Counsel: EUGENE J. METZGER

METZGER, SHADYAC & (Counsel of Record)

SCHWARZ SAMUEL SHEPARD JONES, JR.

1275 K Street, N.W. 1275 K Street, N.W.

Washington, D.C. 20005 Washington, D.C. 20005

(202) 289-4520

JOHN D. SCHUPPER Attorneys for Petitioners

STEPHEN N. DERMER

LOWENSTEIN, SANDLER, BROCHIN

KOHL, FISHER, BOYLAN & MEANOR

65 Livingston Avenue

Roseland, N.J. 07068

iSIn view of the Court of Appeals’ failure to consider the Bank

Merger Act and its legislative history, it is respectfully suggested that

this Court may wish to reverse the decision below summarily and re-

mand with a direction for the Court of Appeals to apply the Bank

Merger Act to this case by entering an order of dismissal pursuant to

the statute of limitations provided in the Bank Merger Act. 12 U.S.C.

§ 1828(cX6).

APPENDIX

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 85-5525

UNITED JERSEY BANKS; UNITED JERSEY BANK/SOUTHWEST;

CONSTELLATION BANCORPORTION; THE NATIONAL STATE

BANK; HORIZON BANCORP; PRINCETON BANK; NEW JERSEY

NATIONAL CORPORATION; NEW JERSEY NATIONAL BANK;

UNITED COUNTIES BANCORPORATION; and UNITED COUNTIES

TRUST COMPANY,

Appellants,

Mary LITTLE PARELL, Commissioner of Banking of the

State of New Jersey; First FIDELITY BANK, N.A., SOUTH

JERSEY; COMMUNITY BANCSHARES CORPORATION; and

NATIONAL BANK AND TRUST COMPANY OF GLOUCESTER

COUNTY

On Appeal from the United States

District Court for the

District of New Jersey (Trenton)

(D.C. Civil No. 85-2783)

Argued November 18, 1985

Before: HIGGINBOTHAM, SLOVITER and

MANSMANN, Circuit Judges

(Filed February 14, 1986)

William S. Greenberg (Argued)

James F. Schwerin

Greenberg, Kelly & Prior

301 Carnegie Center

CN 5320

Princeton, N.J. 08540

Attorneys for Appellants

Irwin I. Kimmelman

Attorney General of New Jersey

James J. Ciancia

Assistant Attorney General

Robert M. Jaworski :

Deputy Attorney Genera

Barbara S. Goldsmith (Argued)

Richard J. Hughes Justice Complex

Trenton, N.J. 08625

’ Attorneys for Appellee

Mary Little Parell, Commissioner

of Banking of the State of New Jersey

Eugene J. Metzger (Argued)

Samuel Shepard Jones, Jr.

Donald L. Hardison

Metzger, Shadyac & Schwarz

Washington, D.C. 20005

John D. Schupper

Stephen N. Dermer

Gregory G. Campisi

Lowenstein, Sandler, Brochin,

Kohl, Fisher, Boylan & Meanor

Roseland, N.J. 07068

Attorneys for Appellees

First Fidelity Bancorporation

First Fidelity Bank, N.A., South Jersey;

rsa | ancshares Corporation; and

National Bank and Trust Company of

Gloucester County

OPINION OF THE COURT

SLOVITER, Circuit Judge.

This case presents a significant issue regarding the scope

and propriety of removal to federal court on the basis of

what is essentially a claim of federal preemption. To reach

that issue, we must traverse the maze of state and federal

legislation on bank mergers, acquisitions and bank holding

companies.

Plaintiffs are attempting to use state law to prevent a

merger between two nationally chartered banks. The

plaintiffs (hereafter ‘“‘United Jersey’’) are five New Jersey

bank holding companies and the subsidiary banks of each.

The defendants are the merging banks, First Fidelity Bank,

N.A., South Jersey, and the National Bank & Trust Com-

pany of Gloucester County (“NB & T’’), and their respec-

tive parent holding companies, First Fidelity

Bancorporation and Community Bancshares Corporation.

All four defendants will be collectively referred to as ‘First

Fidelity” unless otherwise noted. United Jersey also sued

the New Jersey Commissioner of Banking, Mary Little

Parell, seeking to enjoin her to exert her authority over

the merger.

Plaintiffs originally filed their action in New Jersey state

court, but defendants removed it to the United States

District Court for the District of New Jersey. The district

court denied United Jersey’s motion to remand and there-

after dismissed the action as premature. The principal is-

sue before us is whether federal jurisdiction existed to

support removal.

The transaction at issue in this case was structured as

a merger between two nationally chartered banks.’ NB & T

: After the briefs were filed in this case, the parties informed the

was merged into First Fidelity Bank. As consideration,

NB & T shareholders received shares of First Fidelity’s

parent corporation, First Fidelity Bancshares [sic]. After

being presented for verification, N B & T’s shares ceased

to exist without actually changing hands. Prior to the

transaction, NB & T’s parent corporation, Community

Bancshares, also ceased to exist.

Pursuant to its obligations under the federal banking

laws, First Fidelity filed a merger application with the

Comptroller of the Currency, who must approve all merg-

ers of insured banks in which the resulting bank is a

national bank. See 12 U.S.C. § 1828(cK2\A). Three of the

plaintiffs in this case filed formal protests against the

merger with the Comptroller. As required by 12 U.S.C. §

1828(cX4), the Comptroller requested reports from the De-

partment of Justice and the Board of Governors of the

Federal Reserve System concerning the anticompetitive ef-

fect of the merger. Both filed reports which predicted no

significant anticompetitive effects from the merger. On

August 29, 1985, the Comptroller approved the merger.

Under the federal Bank Merger Act, anyone seeking to

challenge a merger between nationally chartered banks on

the ground that the merger violates either the Sherman

or Clayton Acts must file suit within thirty days after the

Comptroller’s approval. 12 U.S.C. § 1828(cK6) & (7)A).?

If no such action is filed, the Comptroller’s decision be-

court that the merger had been consummated. We assume for purposes

of this decision that the merger took place as described in the docu-

ments submitted by the parties.

At the request of the appellants, this court had expedited briefing

and argument in this case. However, the parties delayed two months

in providing the court with the transcript of the argument that it had

requested.

2 The one exception to this limitation is that suits challenging mergers

on the ground that they violate section 2 of the Snerman Act, 15 U.S.C.

§ 2, need not be filed in this thirty day ‘“‘window’’. See 12 U.S.C. §

1828(cX7\C).

a aa ALA ec RR I tele Aelita Lik Pac Irland dabbled

comes final, and the merger may be consummated. Id. §

1828(cX6) & (7A).

In this case, no challenge under the federal antitrust

laws was filed during the thirty-day limitation period. On

September 29, 1985, the limitation period expired. Im-

mediately thereafter the merger took place. Plaintiffs con-

cede that they deliberately chose not to challenge the

merger under federal law.

However, even before the Comptroller’s decision,

plaintiffs sought to use state law to block the merger by

petitioning the New Jersey Commissioner of Banking, Par-

ell, to hold a hearing on the merger. In a letter dated

July 1, 1985, the Commissioner held that she did not have

jurisdiction over this merger, because in her view, New

Jersey had disclaimed any intention to regulate mergers

between national banks. United Jersey appeaied this denial

to the state courts, but no decision had been rendered at

this time this case was briefed.

Using yet another tactic, United Jersey filed this suit

in New Jersey Superior Court, Chancery Division, alleging

two causes of action under state law. The theory of United

Jersey’s complaint was that despite the form of the merger,

it actually was an acquisition of NB & T by First Fidelity

Bancshares, [sic], the holding company. The first count of

United Jersey’s complaint alleged that the transaction vi-

olated a provision of the New Jersey Bank Holding Com-

pany Act, N.J. Stat. Ann. § 17:9A-345(a). In general terms,

this statute prohibits any company owning more that 25%

of the stock of any bank in New Jersey from acquiring

more than 10% of another New Jersey bank if the ac-

quiring bank would then own more than 20% of the bank

deposits in the state. The complaint alleged that after the

* The statute provides as follows:

Except as otherwise provided by sections 3 and 4 of this act,

(a)No company which owns more than 25% of the stock of any

acquisition, the aggregate deposits of the resulting insti-

tution would exceed this 20% state imposed cap. Another

section of the New Jersey banking laws, N.J. Stat. Ann.

§ 17:9A-347, allows companies to exceed this 20% deposits

cap if the acquisition occurs by way of a merger.‘ United

Jersey’s complaint sought to avoid the force of this pro-

vision by arguing that it was counter to the policy ex-

pressed in § 345, and therefore, that the New Jersey

legislature had repealed it by implication.®

United Jersey’s complaint also charged that the merger

would restrain commerce and tend to create a monopoly

in violation of provisions of the New Jersey Antitrust Act,

N.J. Stat. Ann. § 56:9-4. This statute disclaims regulation

of ‘‘[t]he activities of any State or national banking insti-

bank located inside this State shall acquire ownership of more than

10% of the stock of another bank located inside this State if, at

the time of such acquisition, or if, as a result of such acquisition,

the company owns, or would own, more than 10% of the stock of

each of two or more banks located inside this State, whose ag-

gregate average deposits exceed 20% of the aggregate average

deposits of all banks other than savings banks transacting business

in this State as of the two cal] dates for which published figures

are available next preceding such acquisition.

N.J. Stat. Ann. 17:9A-345(a).

‘N.J. Stat. Ann. 17:9A-347 provides:

Nothing in this act shall prohibit a company from acquiring

bank stock in excess of the limitation imposed by section 2 of this

act, if such acquisition results from an exchange of stock resulting

from the merger or consolidation of a bank with another bark or

banks.

* Specifically, United Jersey argues that the exception to § 345 con-

tained in § 347 was inadvertently left in the statute when the New

Jersey legislature amended § 345 in 1968 to allow partial ownership

of banks by holding companies. According to United Jersey, leaving

the § 347 exception intact effectively undermines the limitation in §

346. See Brief for United Jersey at 6. Whether the New Jersey leg-

islature did intend to repeal § 347 is, of course, a question of state

law.

cid tad nr ateceiers

tution to the extent that such activities are regulated ...

by ... the Federal Government under the banking laws

of the United States.’’ N.J. Stat. Ann. § 56:9-5(bX7). United

Jersey’s complaint argued, however, that the transaction

had been structured to avoid federal regulation and, there-

fore, that this exemption did not apniy.

The complaint sought relief in the form of a declaration

that the New Jersey banking and antitrust laws applied

to the merger and that the merger would violate these

laws. United Jersey also sought an injunction against the

consummation of the merger. Finally, United Jersey asked

for a deciaration that the Commissioner of Banking had

authority over the merger and an injunction against the

Commissioner prohibiting her from approving the trans-

action.

The corporate defendants removed the action to federal

court.® At the same time, they moved to dismiss the com-

plaint for failure to state a claim upon which relief could

be granted. United Jersey then cross-moved for a remand

to the state court.

The district court denied the petition to remand and

granted the motion to dismiss. The court rejected United

Jersey’s characterization of the transaction as an acqui-

sition of a national bank by a holding company, and in-

stead, characterized it as a merger between two national

banks. The court interpreted a provision of the New Jersey

The Attorney General of New Jersey, representing the New Jersey

Commissioner of Banking, refused to join the petition for removal. The

Attorney General took the position that the complaint did not state a

claim either under federal or state law. United Jersey argues that the

Commissioner’s failure to join the petition renders it fatally deficient

and requires that the action be remanded to state court. See Tri-Cities

Newspaper, Inc. v. Tri-Cities Printing Pressman & Assistants’, Local

349, 427 F.2d 325, 327 (5th Cir. 1970Xall but ‘“‘nomina!” parties must

join a petition for removal). Because of the view we take of the case,

we need not decide this issue.

banking laws, N.J. Stat. Ann. § 17:9A-148B,’ which on its

face applies only to mergers of state banks into national

banks, as reflecting New Jersey’s recognition that “‘merg-

ers into national banks under national bank charters are

beyond the power of the state to regulate.’’ See App. at

30a. The court concluded that the state has no role with

respect to the merger and also rejected plaintiffs’ efforts

to bring the transaction under the federal Bank Holding

Company Act which permits some continued state regu-

lation. The court also held that no antitrust challenge to

’ This statute provides as follows:

B. One or more banks may, without the approval of the com-

missioner or any other officer, department, board or agency of

this State, merge into or consolidate with a national banking as-

sociation under the charter of such association, with the approval

of the holders of at least 2/3 of the capital stock of each such

bank entitled to vote. A majority of the directors of each such

bank shall, within 10 days after such approval] had been given, file

in the department a certificate over their signatures that such

approval has been given, and that the bank intends to act in

pursuance thereof. Except as otherwise provided in subsection D.

of this section, a merger or consolidation authorized by this sub-

section shall be effected solely in the manner and with the effect

provided by applicable Federal law, and no such merger or con-

solidation shall be subject to sections 182 through 147 or to any

other law of this State; but a copy of the agreement or merger

or consolidation certified by the comptroller of the currency shall

be evidence, and may be recorded, as provided by section 138.

Upon the taking effect of the merger or consolidation, the bank

shall be deemed to have surrendered its charter.

N.J. Stat. Ann. § 17:9A-148(B) (emphasis added). For purposes of this

section, the New Jersey banking laws define “‘bank’”’ only to include

state-chartered banks. See N.J. Stat. Ann. § 17:9A-1(1).

®*The Attorney General’s brief agrees with plaintiffs that section

148(B) applies only to mergers of state banks into national banks, but

also notes that the state banking laws do not grant the Commissioner

of Banking any authority to regulate mergers between national banks.

See Brief on Behalf of Mary Little Parell, Commissioner, New Jersey

Department of Banking at 7.

a merger between national banks could be stated under

state law. Thus, according to the district court, “the

{plaintiffs} necessarily [are] stating a federal cause of ac-

tion....’”’ App. at 3la (quoting 14A C. Wright, A. Miller

& E. Cooper, Federal Practice and Procedure § 3722 at

271-273 (1985\hereafter ‘Wright & Miller’’)). The court

further stated that this was a case “in which the state

law which plaintiffs invoke expressly indicates that Federal

law controls the question they raise.’’ App. at 32a. There-

fore, federal jurisdiction existed and removal was proper.

With federal jurisdiction established, the court turned

to First Fidelity’s motion to dismiss. At the time of the

district court’s decision, the Comptroller of the Currency

had not yet approved the merger. Thus, United Jersey’s

“necessarily” federal cause of action challenging the

merger on federal antitrust grounds, which the court

viewed as the only cause of action plaintiffs could assert,

was premature and the court dismissed it.

In this appeal, United Jersey presses its contention that

' there is no federal jurisdiction to support removal of its

complaint. In this argument, United Jersey is joined by

the Attorney General of New Jersey, who in the alter-

native supports the district court’s decision to dismiss if

this court finds jurisdiction.

Il.

Appellants argue that removal was improper because

their complaint filed in state court was based on state law

claims. They argue that the district court erred in per-

mitting removal on the basis of what was, in effect, a

federal defense, i.e. defendants’ contention that federal

statutes rather than state law governs the merger of two

national banks.

It is one of the settled principles of federal jurisdiction

jurisprudence that the federai question must appear on the

face of the complaint, and that federal jurisdiction cannot

10a

be created by anticipating a defense based on federal law.

Louisville & Nashville Railroad v. Mottley, 211 U.S. 149

(1908). An anticipated defense of federal preemption can-

not provide a basis for removal, see Trent Realty Associates

v. First Federal Savings & Loan Association, 657 F.2d

29, 34-35 (3d Cir. 1981), expressly approved in Franchise

Tax Board v. Construction Laborers Vacation Trust, 463

U.S. 1, 12 n.11 (1983).

As the Supreme Court recently reaffirmed, where there

is no diversity of citizenship between the parties, “‘the

propriety of removal turns on whether the case falis within

the original ‘federal question’ jurisdiction of the United

States district courts. ..’’ Franchise Tax Board, 463 U.S.

at 8.° Federal question jurisdiction exists if the action

‘“‘arises under’”’ the ‘‘Constitution, laws, or treaties of the

United States.”” See 28 U.S.C. § 1331.

79 determine whether a case “‘arises under’ federa! law,

a court must look to the allegations of the plaintiff's ‘“‘well-

pleaded complaint.” Franchise Tax Board, 463 U.S. at 10.

As generally interpreted, ‘[Aj right or immunity created

by the Constitution or laws of the United States must be

an element, and an essential one, of the plaintiff's cause

* Removal in this case is governed by 28 U.S.C. § 144](a) & (b).

which provide:

(a) Except as otherwise expressly provided by Act of Congress,

any civil action brought in a State court of which the district

courts of the United States have original jurisdiction, may be re-

moved by the defendant or the defendants, to the district court

of the United States for the district and division embracing the

place where such action is pending.

(b) Any civil action of which the district courts have original

jurisdiction founded on a claim or right arising under the Consti-

tution, treaties or laws of the United States shali be removable

without regard to the citizenship or residence of the parties. Any

other such action shall be removable only if none of the parties

in interest properly joined and served as defendants is a citizen

of the State in which such action is brought.

—— soa 2 Pee

AB A Ht te ASMA Si SLE EOS A

PT tty oF es

lla

of action.” Jd. at 10-11 (quoting Gully v. First National

Bank, 299 U.S. 109, 112 (1936)). See also New Jersey State

AFL-CIO v. New Jersey, 747 F.2d 891, 892 (8d Cir. 1984).

A corollary of this rule is that the “plaintiff is master of

his claim and may choose not to assert a federal right

that is available and rely only on state law. . .”” 14A Wright

& Miller 3722 at 266-68 (citing The Fair v. Kohler Die &

Speciality Co., 228 U.S. 22 (1913)).

Application of these principles to this case suggests that

removal was improvident. United Jersey relied on state

law in its complaint, which usually signifies that the claim

does not arise under federal law. Not surprisingly, the

issue is not as straightforward as the black ietter law

appears.

In Franchise Tax Board, Justice Brennan, writing for

a unanimous court, referred to two situations where fed-

eral jurisdiction could be available even though plaintiff

based its claim in state court on state law: (1) wnen “‘it

appears that some substantial, disputed question of federal

law is a necessary element of one of the well-pleaded state

claims” or (2) when it appears that plaintiff's claim “‘is

‘really’ one of federal law.’’ 463 U.S. at 18.

The parameters of the ‘“‘substantial] disputed question of

federal law’’ situation are not easily drawn. In Franchise

Tax Board, a state Board filed suit in state court against

a trust administering an employee welfare benefit plan

seeking damages for the trust’s failure to honor the Board’s

levies on account of unpaid taxes by employee beneficiaries

and seeking a declaratory judgment that the state’s power

to levy on funds held in trust was not preempted by ER-

ISA. The Supreme Court held that removal of the action

to federal court was improper, since it was not within the

removal jurisdiction conferred by 28 U.S.C. § 1441. The

Court recognized that the question of federal preemption

was ‘“‘a necessary element of the declaratory judgment

claim’”’ since the only questions in the dispute between the

12a

parties concerned the rights and duties of the trustees

under ERISA. The state Board could not obtain the dec-

laratory relief it sought ‘‘without a construction of ERISA

and/or an adjudication of its pre-emptive effect and con-

stitutionality—all questions of federal law.’’ 463 U.S. at

14.

Nonetheless, the Court held that federal jurisdiction was

unavailable even though the trust, had it so sought, could

have filed in federal court the mirror image suit, one for

a declaration of its rights and duties under ERISA.’ The

Court looked to the ‘““‘current of jurisdictional legislation’”’

since 1875 ‘‘with an eye to practicability and necessity.”

Id. at 20 (quoting Skelly Owl Co. v. Phillips Petroleum Co.,

339 U.S. 667, 673 (1950)). Careful examination of the

framework of the Court’s analysis of the “substantial, dis

puted question of federal law” issue, set forth in Part III

A of that opinion, see id. at 13-22, manifests that the Court

was not enunciating a new basis for federal jurisdiction

but instead was reaffirming the traditional well-pleaded

complaint test ‘‘until Congress informs us otherwise.’ Jd.

at 22.

Although the Court was cognizant that adherence to

earlier principles that limit federal jurisdiction may pro-

duce “‘awkward results,”’ particularly where the only ques-

tion for decision is raised by a federal preemption defense,

the Court reaffirmed the principles of Skelly Oil Co. v.

Phillips Petroleum Co. that focus must be on the under-

lying cause of action as set forth in the well-pleaded com-

plaint, and of Gully v. First National Bank that ‘“‘a suit

brought upon a state statute does not arise under an act

of Congress or the Constitution of the United States be-

cause prohibited thereby.’’ 299 U.S. at 116 quoted in Fran-

Court held in Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983), that

employers could bring a federal suit claiming that certain state laws

were preempted by ERISA.

13a

chise Tax Board, 463 U.S. at 12. See id. at 22. Thus, it

is not enough that there be a “‘substantial, disputed ques-

tion of federal law.’’ It is only if that question also “‘is a

rcessary element of one of the well-pleaded state claims”

that federal jurisdiction can be found.

When viewed under the well-pleaded complaint test, the

United Jersey complaint presents less, rather than more,

basis for finding federal jurisdiction than did the complaint

in Franchise Tax Board. United Jersey’s first count alleges

that, whatever its form, the transaction at issue is actually

an acquisition of a bank, NB & T, by a holding company,

First Fidelity Bancorportion, and that the New Jersey

Bank Holding Company Act (which defines ‘‘benk”’ to in-

clude state and national] banks, see N.J. Stat. Ann. § 17:9A-

344(a)) prohibits the acquisition because the resulting de-

posits will exceed the statutory cap. The cause of action

alleged patently is derived from state law. The second

count alleges the acquisition violates the New Jersey An-

titrust Act. As in the second count of the Franchise Tar

Board complaint, this count refers to federal law not to

establish its claim but merely to negate jurisdiction there-

under.

Neither count affords a basis for finding that plaintiffs’

“right to relief under state law requires resolution of a

substantial question of federal law in dispute between the

parties’. Franchise Tax Board, 463 U.S. at 13. There may

be some basis to agree with defendants that United Jer-

sey’s view of the state law is incorrect and will be so

found. It is, however, for the state court to make the

determination as to the applicability of its state law.

The second situation for finding federal jurisdiction re-

ferred to in Franchise Tax Board, i.e. where the state

claim pleaded is “really one” of federal law, is not as

difficult to apply because there is ample precedent to il-

lustrate its scope. As explained by Justice Brennan, “‘it is

an independant corollary of the well-pleaded complaint rule

EEO

l4a

that a plaintiff may not defeat removal by omitting to

plead necessary federal questions in a complaint.” F’ran-

chise Tax Board, 463 U.S. at 22. This same principle has

been referred to elsewhere as the ‘“‘artful pleading” doc-

trine, under which a court will not allow a plaintiff to

deny a defendant a federal forum when the plaintiff’s com-

plaint contains a federal claim “artfully pled” as a state

law claim. See 14A Wright & Miller § 3722 at 270; Evt-

mann v. New Orleans Public Service, Inc., 730 F.2d 359,

365 (5th Cir.), cert. denied, 105 S. Ct. 433 (1984).

The Court in Franchise Tax Board distinguished the

case before it from cases where the “‘real’’ nature of the

claim is federal, which it illustrated by reference to Avco

Corp. v. Aero Lodge No. 785, International Association of

Machinists, 390 U.S. 557 (1968). The complaint in Avco

was filed in state court by an employer seeking to enjoin

the union and its members from striking in violation of a

‘“‘no-strike’”’ clause in the collective bargaining agreement.

Although the complaint did not invoke federal law, it was

clear to the Court that the action ‘arose under” § 301 of

the Labor Management Relations Act because of the pow-

erful preemptive force of § 301 which displaced entirely

any state cause of action for violation of a contract be-

tween an employer and a labor organization. As Justice

Brennan explained ‘‘[a]ny such suit is purely « creature of

federal law, notwithstanding the fact that state law would

provide a cause of action in the absence of § 301.” Fran-

chise Tax Board, 463 U.S. at 23. In contrast, the suit filed

by Franchise Tax Board did not ‘arise under’ ERISA

since that statute gave the state no right to seek the relief

it pressed.

Using similar reasoning, United Jersey’s suit does not

“arise under’ any federal statute. The fact that United

Jersey’s claim under state law may be defeated because

of the preemptive effect of federal banking laws does not

mean that such federal laws provide the basis of the cause

of action, as in the case of § 301 of the LMRA.

15a

It appears that it was the artful pleading doctrine that

was the basis of the district court’s conclusion that federal

jurisdiction existed in this case. That court referred to

Federated Department Stores, Inc. v. Moitie, 452 U.S. 394

(1981), the paradigmatic case of “‘artful pleading’. The

Moitie action which had been removed from state court

tracked an earlier federal antitrust action by the same

plaintiff that had been dismissed for failure to state a

claim. In concluding in a footnote that there was federal

jurisdiction over the removal action, the Court held that

the claims had “sufficient federal character to support re-

moval,”’ and endorsed the ‘‘artful pleading” doctrine as a

“settled principle.”’ Jd. at 397 n.2.(quoting 14A Wright &

Miller § 3722 at 564-66 (1976)).

Unless applied with circumscription, the artful pleading

doctrine may raise difficult issues of federal-state relations.

An expansive application of the doctrine could effectively

abrogate the rule that a plaintiff is master of his or her

complaint. Hunter v. United Air Lines, 746 F.2d 635, 640

(9th Cir. 1984), cert. denied., 106 S.Ct. 180 (1985). Those

courts of appeal that have applied the doctrine have done

so primarily in the context of § 301 of the Labor Man-

agement Relations Act, 29 U.S.C. § 185, not only because

the extent of federal primacy is well established, see Hil-

lard v. Dobelman, 774 F.2d 886, 887 (8th Cir. 1985); Mitch-

ell v. Pepsi-Cola Bottlers, Inc., 772 F.2d 342, 344 (7th Cir.

1985), but because all state law is displaced.

Whatever the ultimate limits of the artful pleading doc-

trine, this case is governed by the general rule that federal

jurisdiction will not be found when the complaint states a

prima facie claim under state law. See Guinasso v. Pacific

First Federal Savings & Loan Association, 656 F.2d 1364,

1367 (9th Cir. 1981), cert. denied, 455 U.S. 1020 (1982).

First, this is not a case like Moitie in which the plaintiff

first filed a lawsuit containing federal claims and then,

after dismissal, sought to recast those claims under state

law. Here, plaintiff has consistently sought to litigate state

16a

claims in state court. Cf Powers v. South Central United

Food & Commercial Workers Union and Employers Health

& Welfare Trust, 719 F.2d 760, 766 (5th Cir. 1983). In-

deed, in this case, United Jersey apparently has foregone

its federal remedies to pursue relief in state court. More-

over, there is no indication in the record that United Jer-

sey brought this state action to foreclose First Fidelity’s

access to a federal forum to litigate federal issues. See

14A Wright & Miller 3722 at 266.

The district court seemed to rely on the “exclusivity”

of federal law to displace both Count One of United Jer-

sey’s complaint alleging New Jersey’s banking laws pro-

hibited the transaction and Count Two alleging the

transaction violated New Jersey’s antitrust law. Although

the district court disclaimed relying on federal preemption,

that was the practical effect of its holding. The district

court’s action is thus irreconcilable not only with the hold-

ing in Franchise Tax Board but with the stream of au-

thority in that Court and in the courts of appeals. Even

though the preemptive effect of federal legislation has al-

ready been established, a state claim does not thereby

“arise under” federal law nor is the state court without

jurisdiction on that basis. For example, although the Nat-

ural Gas Act had already been held to preempt state law

on the issue of wholesale natural gas price, the Court held

that a contract price dispute filed in state court was not

within the original jurisdiction of the federal courts. Pan

American Petroleum Corp. v. Superior Court, 366 U.S.

656 (1961). It was immaterial that plaintiff could have

elected to proceed on a federal ground. Jd. at 663. The

state claims asserted ‘“‘do not lose their character because

it is common knowledge that there exists a scheme of

federal regulation of interstate transmission of natural

gas.” Id.

Unlike federal labor relations law, the law with respect

to bank mergers is no more “exclusively” federal than

was the law with respect to interstate transmission of

17a

natural gas. In the case of labor relations, the entire field

has been occupied by the federal statute, whereas in the

other areas the nature and operation of the federal and

state laws must be examined to determine if they can

operate compatibly. See Note, Federal Preemption, Re-

moval Jurisdiction and the Well-Pleaded Complaint Rule,

51 U. Chi. L. Rev. 634, 664-66 (1984).

We need not decide whether a completely frivolous or

baseless claim under state law would justify a federal court

in dismissing on the merits rather than remanding. What-

ever the ultimate decision on the merits, we are not faced

with such a claim.

Under United Jersey’s theory expressed in Count One,

federal law does not displace state law. Arguably, a New

Jersey court could find that the essence of this transaction

is an acquisition and thus that the New Jersey Bank Hold-

ing Company Act applies. As the state points out, and as

our recent decision in Girard Bank v. Board of Governors

of the Federal Reserve System, 748 F.2d 838 (3d Cir. 1984)

recognizes, a transaction may have attributes of both a

merger and a stock acquisition, and thereby be subject to

review by more than one agency.

In the context of bank holding company regulation, fed-

eral law explicitly preserves state law. See 12 U.S.C. §

1846. It is not determinative that United Jersey may not

prevail in its contention that the New Jersey Bank Holding

Company Act prohibits the transaction at issue. Federal

jurisdiction does not depend in the merits of the plaintiff's

complaint.

Significantly, defendant Parell, Commissioner of the New

Jersey Department of Banking, who disagrees with United

Jersey’s claim on the merits, nonetheless agrees that re-

moval was improper. After detailing the origins and op-

eration of the dual banking system, her brief argues that

18a

[w]ith this background in mind, it becomes clear that

plaintiffs’ complaint does state a separate claim under

state law, apart from any claim concerning the ille-

gality of the bank merger; specifically, that the New

Jersey BHCA prohibits the acquisition of [NB & T]

Gloucester Bank by First Fidelity Bancorporation. If

the plaintiffs are correct in their contention in this

regard, and the State reiterates its conviction, ex-

pressed to the District Court, that they are not, it

seems logically to follow that the State court would

have jurisdiction either to enjoin the acquisition (with-

out technically infringing upon the Comptroller’s au-

thority to rule upon the merger) or, at the very least,

to declare what the New Jersey law means and how

it applies, or does not apply, in the context of the

instant controversy.

Brief of Appellee Parell at 11.

With respect to Count Two, although United Jersey’s

allegation that the transaction will violate the New Jersey

Antitrust Act may seem tenuous in light of the explicit

exemption from its prohibitions for the activities of banks

to the extent such activities are regulated by federal law,

it is not clear that the New Jersey courts would treat this

as a case to which New Jersey law does not extend. Cor-

gress has allowed the states to retain extensive authority

to legislate in the antitrust field. See 1 P. Areeda & D.

Turner Antitrust Law { 208 at 58 (1978). The New Jersey

Supreme Court has specifically held that the New Jersey

Antitrust Act is not preempted by federal law. See State

v. Lawn King, Inc., 84 N.J. 179, 191, 417 A.2d 1025, 1032

(1980). First Fidelity has not directed our attention to any

New Jersey case that conclusively rejects the theory un-

derlying the antitrust claim of Count Two of United Jer-

sey’s complaint." In such a case, it should be for the New

Other cases finding federal jurisdiction for state antitrust challenges

19a

Jersey courts, in the first instance, to determine whether

the count alleging violation of state antitrust law is without

any facial validity.

Our conclusion that removal of United Jersey’s action

was improper does not mean that there are not good rea-

sons to support the holding that the district court made.

It may well be that federal courts should be appropriate

removal fora when state actions will inevitably require

decisions on federal law. However, as Justice Brennan

stated, ‘‘for reasons involving perhaps more history than

logic,’ Franchise Tax Board, 463 U.S. at 4, that choice

is for Congress.

Ill.

We conclude, therefore, that the district court did not

have jurisdiction over this case, and thus that United Jer-

sey’s motion to remand was improperly denied. In so de-

ciding, we of course express no opinion on the merits of

United Jersey’s state law claim.’* Accordingly, the decision

of the district court wi!] be reversed and the case will be

remanded to that court so that it can remand the action

to the New Jersey Superior Court from which it was re-

moved.

are distinguishable. In In re Wiring Device Antitrust Litigation, 498

F. Supp. 79 (E.D. N.Y. 1980), the state antitrust statute had been

interpreted to apply only to intrastate commerce and the plaintiffs

sought to claim violations of the state law based on interstate com-

merce. Similarly, in Three J. Farms, Inc. v. Alton Box Board Co.,

1979-1 Trade Cas. (CCH) 4 62,423 (D.S.C. 1978), rev’d on other grounds,

609 F.2d 112 (4th Cir. 1979), cert. denied, 445 U.S. 911 (1980), the

plaintiff sued under a narrowly interpreted state law to redress wide

ranging interstate anticompetitive behavior. In both cases federal class

actions against the same defendants were already pending.

2 First Fidelity argues that the Comptroller’s approval and the sub-

sequent consummation of the merger rendered this case moot. In light

of our holding that the district court had no subject matter jurisdiction,

we do not reach the mootness issue. First Fidelity, of course, will be

free to contend before the state court that this case is now moot.

20a

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

2la

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 85-5525

UNITED JERSEY BANKS et al.,

Appellants

Mary LITTLE PARELL, etc. et al.

SUR PETITION FOR REHEARING

Present: ALDISERT, Chief Judge, SEITZ, ADAMS, GIB-

BONS, HUNTER, WEIS, GARTH, HIGGIN-

BOTHAM, SLOVITER, BECKER, STAPLETON,

and MANSMANN, Circuit Judges.

The petition for rehearing filed by Appellees, First Fi-

delity Bancorporation; First Fidelity Bank, N.A., South

Jersey; Community Bancshares Corporation; and National

Bank and Trust Company of Gloucester County,

in the above-entitled case having been submitted to the

judges who participated in the decision of this court and

to all the other available circuit judges of the circuit in

regular active service, and no judge who concurred in the

decision having asked for rehearing, and a majority of the

circuit judges of the circuit in regular active service not

having voted for rehearing by the court in banc, the

petition for rehearing is denied.

By the Court,

/s/DOLORES K. SLOVITER

Circuit Judge

Dated: March 11, 1986

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 85-5525

UNITED JERSEY BANKS, et al.

VS.

Mary LITTLE PARELL, etc.

United Jersey Banks, etc., Appeilants

Pursuant to Rule 41(b) of the Federal Rules of Appellate

Procedure, it is O R D E R E D that issuance of the

certified judgment in lieu of formal mandate in the above

case be, and it is hereby stayed until April 17, 1986.

/s(DOLORES K. SLOVITER

Circuit Judge

Dated April 1, 1986

23a

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

Civil Action

No. 85-2783

UNITED JERSEY BANKS; UNITED JERSEY BANK/SOUTHWEST;

CONSTELLATION BANCORPORATION; THE NATIONAL STATE BANK;

HORIZON BANCORP; PRINCETON BANK; NEW JERSEY NATIONAL

CorP.; NEW JERSEY NATIONAL BANK; UNITED COUNTIES

BANCORPORATION; and UNITED COUNTIES TRUST COMPANY

Plaintiffs,

VS.

Mary LITTLE PARELL, Commissioner of Banking of the State

of New Jersey; et al.,

Defendants.

ORDER

The parties having moved for various relief and the

court having considered the papers submitted and the ar-

gument of counsel, and in accordance with the opinion

dictated into the record today,

It is on this 3lst day of July, 1985,

ORDERED that the Complaint be and the same hereby

is dismissed; and it is further

ORDERED that the motion to remand this action to.

the state court is denied; and it is further

ORDERED that the cross-motions for sanctions are de-

nied.

/s[MARYANNE TRUMP BARRY

Maryanne Trump Barry

U.S.D.J.

24a

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

Civil Action

No. 85-2783

UNITED JERSEY BANK, et al,

Plaintvffs,

VS.

Mary LITTLE PARRELL, et al,

Defendants.

Trenton, New Jersey

July 31, 1985

OPINION

BEFORE:

THE HON. MARYANNE TRUMP BARRY,

U.S.D.J.

APPEARANCES:

GREENBERG, KELLEY & PRIOR, ESQS.,

Attorneys for Plaintiffs,

BY: WILLIAM GREENBERG, ES@., and

JAMES F. SCHWERIN, ESQ.

ROBERT M. JAWORSKI, Deputy Attorney Gen-

eral,

Attorney for Defendant Parell.

LOWENSTEIN, SANDLER, BROCHIN, KOHL,

FISHER BOYLAN & MEANOR, ESQS.,

BY: STEPHEN N. DERMER, ESQ.,

and

METZGER, SHADYAC & SCHWARTZ [sic],

ESQS.,

25a

BY: EUGENE J. METZGER, ESQ. (D. C. Bar),

Attorneys for Defendants.

THE COURT: In this action, Plaintiffs, who include bank

holding companies, state chartered banks and federally

chartered banks, seek to block a proposed merger, de-

scribed in the complaint as an ‘‘acquisition,”” between

Defendants First Fidelity Bank, N.A., South Jersey (First

Fidelity) and National Bank and Trust Company of

Gloucester County (Gloucester County), two national bank-

ing associations. To this end, Plaintiffs filed suit in the

Superior Court of New Jersey, Chancery Division, seeking

a declatory [sic] judgment and other equitable relief, in-

cluding permanently enjoining the proposed “acquisition.”

That action was removed to this Court, where it is now

the subject of a motion to dismiss by Defendants and a

cross motion to remand by the Plaintiffs. For the reasons

set forth below, Plaintiffs’ motion to remand will be de-

nied, and Defendants’ motion to dismiss will be granted.

In their complaint, Plaintiffs invoke various New Jersey

banking laws as well as the State Antitrust Act in support

of their attempt to prevent the aforesaid ‘“‘acquisition.”

First, Plaintiffs claim that under N.J.S.A. 17:9A-355 et

seq., that acquisition is subject to the approval of the New

Jersey Commissioner of Banking, who is a named

Defendant in this action. Further, Plaintiffs claim that

N.J.S.A. 17:9-A-345(a), New Jersey’s “‘cap’’ law, applies

to the proposed acquisition, despite the fact that N.J.S.A.

17:9A-347 explicitly exempts mergers and consolidations

from coverage by 345(a). Finally, Plaintiffs aver that the

proposed ‘“‘acquisition’’ will violate N.J.S.A. 56:9-4, a pro-

vision of the New Jersey Antitrust Act.

Having set forth these claims, Plaintiffs demand judg-

ment:

One, declaring that, as set forth in New Jersey’s cap

law, bank holding companies may not acquire ownership

26a

of more than 10 percent of the stock of two or more banks

in the State of New Jersey with aggregate average de-

posits exceeding 20 percent of the aggregate average de-

posits of all banks in New Jersey other than savings banks

whether the means of acquisition be by purchase, merger,

consolidation, or otherwise;

Two, declaring that N.J.S.A. 17:9A-347, which, I note,

exempts mergers from the cap law, has been repealed by

implication;

Three, declaring that acquisition of a national banking

association by a bank holding company through an ex-

change of stock is subject to approval by the New Jersey

Commissioner of Banking;

Four, declaring that it is against the public policy of

the State of New Jersey for the Commissioner of Banking

to approve an acquisition by any bank holding company,

through any means, cf more than 10 percent of the stock

of any bank within New Jersey which will result in own-

ership of more than 10 percent of stock of two or more

banks with aggregate average deposits of all banks in New

Jersey other than savings banks;

Five, enjoining the Commissioner of Banking of New

Jersey from approving the acquisition of Gloucester County

by First Fidelity Bancorporation; Six, permanently enjoin-

ing the acquisition of National Bank & Trust Co. of

Gloucester County by First Fidelity Bancorporation.

Plaintiffs also seek attorneys’ fees, filing fees, and costs

of suit.

In addition to First Fidelity and Gloucester County,

Plaintiffs’ State Court complaint named as Defendants

Mary Little Parell, the New Jersey Banking Commissioner;

and First Fidelity Bancorporation and Community Banc-

shares Corporation, the holding companies of which First

Fidelity and Gloucester County, respectively, are subsidi-

aries. With the exception of Defendant Parell, all

27a

Defendants removed this action to this Court, asserting

that it raised a Federal question. These Defendants si-

multaneously filed this moticn to dismiss, asserting that

Plaintiffs’ claims fa. to state a claim upon which relief

can be granted in tuat those claims, predicated on State

law, are pre-empted by Federal banking and antitrust law.

By way of response, Plaintiffs filed their cross motion to

remand this action to State Court, asserting that it raised

purely state law claims to which pre-emption merely pro-

vides a defense.

Plaintiffs argue that the complaint sounds solely in State

law for violations of the State Statute regarding bank

holding companies, which has its Federal counterpart in

the Bank Holding Company Act, 12 U.S.C. Section 1841

et seq. The acquisition, which has triggered the need for

a statutory interpretation under the declaratory judgment

count, also amounts, they suggest, to a violation of the

New Jersey Antitrust Act, and injunctive relief is sought

to prevent this acquisition. The acquisition, of course, re-

fers to a merger of two national banks’. But Plaintiffs

‘ Plaintiffs also attempt to characterize this merger as a holding

company acquisition for reasons which will become clear infra and pre-

sumably in large part because were this characterization correct, the

strictures of N.J.S.A. 17:9A-148(b) would not apply.

2[sic] In addition to Plaintiff's argument that removal was improper

because their complaint sounds in state law, they also contest removal

on the grounds that Commissioner Parei] did not sign the bank

Defendant's petition for removal.

Although a removal petition must ordinarily be signed by all

Defendants, Gableman v. Peoria, D & E. Ry. Co., 179 U.S. 335 (1900);

In Re General Adjudication of All Rights to Use Water, 531 F. Supp.

449, 455 (D.S.D. 1982), ‘“‘only indispensible Defendants are required to

join in the petition for removal; the consent of nominal or formal parties

is not necessary.”” Ryan v. State Board of Elections of State of Illinois,

661 F. 2nd 1130, 1134 (7th Circuit 1981) quoting First National Bank

of Chicago v. Mottola, 302 F. Supp. 785, 790-91 (N.D. Illinois 1969),

affirmed, First National Bank of Chicago v. Ettlinger, 465 F. 2d 343,

345 (7th Circuit 1972). “‘The ultimate test of whether the .. Defendants

28a

understand that at this point in time they have no right

to bring a Federal action challenging the proposed merger

under the Bank Merger Act, and that that right will not

exist until after the Comptroller of the Currency has ap-

proved the merger. Plantiffs are now challenging the

merger before the Comptroller.

Plaintiffs assert that Defendants’ claim that mergers of

national banking associations are controlled by Federal law

and therefore that Federal jurisdiction exists is asserted

only as a defense in pre-emption to this action. Thus, they

argue, Federal jurisdiction does not exist and removal was

improvidently granted. If a Federal pre-emption defense

were all that were before me, I would agree.

The thrust of Plaintiffs’ argument is that all the relief

they seek is pursuant to New Jersey Statutes, and there

is no form of remedy requested which arises under the

Constitution or laws of the United States including their

request that the proposed merger of two national banks

be permanently enjoined. They note in support of this

position that the complaint is devoid of any mention of

Federal law.’

are ... indispensible [as opposed to nominal or formal] parties is whether

in the absence of [such defenaants], the Court can enter a final judg-

ment consistent with equity and good conscience which would not be

in any way unfair or inequitable to Plaintiff. Tri-Cities Newspapers,

Inc. v. Tri-Cities P.P.&A., Local 349, 427 F.2d 325, 327 (5th Circuit

1970).

Clearly, Commissioner Parell is a nominal, as opposed to an indis-

pensible party. Plaintiffs asked her to make a determination which, by

her own reading of state banking law, she can not make. The Com-

missioner of Banking is not a party in interest in this suit, and her

failure to join in the bank Defendants’ removal! petition does not call

for a remand.

*It is not necessary for purpose of removal] for Plaintiffs to have

specified a Federa] Statute if the right to relief requires resolution of

a substantia] question of Federal law, i.e. that Federal law creates the

cause of action or that Plaintiff's right to relief necessarily depends

29a

Defendants describe the complaint as an attempt to pre-

empt the lawful regulatory province of the U.S. Govern-

ment and say that it seeks judicial examination, in State

Court, of a proposed merger between two national banks,

an issue which will be solely with the purview of the Fed-

eral courts but not in advance of a determination of its

appropriateness by the Comptroller of the Currency. They

reject Plaintiffs’ contention that the merger of two na-

tional banks is subject to attack under the laws of New

Jersey when those laws expressly exempt such mergers

from state examination.

Defendants point to the following in support of their

position. Title 12, Section 1828(c) of the United States

Code (the Bank Merger Act) assigns no role, they argue,

to any State Banking official or agency in the review of

all bank mergers contemplated by that Act. Section 214(a)

of that title provides the conditions under which a national

bank may merge with and into a State chartered bank,

while Section 214c provides that ‘‘... [NJo ... merger [of

a national bank into a state bank] shall take place ...

unless under the law of the state in which such national

banking association is located State banks may without

approval by any State authority ... merge ... with na-

tional banking associations ....”’ (Emphasis supplied)

Moreover, N.J.S.A. 56:9-5(bX7) specifically exempts from

the New Jersey Antitrust Act “(t]he activities of any ...

national banking institution to the extent that such activ-

ities are regulated or supervised by ... the Federal Gov-

ernment under the banking laws of the United States.”

on resolution of a substantial question of federal] law. Franchise Tax

Board of the State of California v. Construction Laborers Vacation

Trust For So. Calif., 103 S. Ct. 28 VI [sic] at 2851 (1983)[.] Defendants

do not find it surprising that the complaint does not allege claims under

Federal antitrust or banking laws given the unavailability of Plaintiff's

state law claims by comprehensive Federal] antitrust and banking law

in the area of national bank mergers.

30a

And of critical importance here, N.J.S.A. 17:9A-148 pro-

vides, in relevant part:

A, as used in Subsection B. of this section ‘‘applicable

Federal laws’’ means the law of the United States ...

governing ... the merger ... of a bank organized under

State law into a national banking association, under the

charter of such association .. .;

B, one or more banks may without the approval of the

commissioner or of any other officer, department, board

or agency of this State, merge into ... a national banking

association under the charter of each [sic] association ...

[A] merger authorized ... by this subsection shall be ef-

fected solely in the manner and with the effect provided

by applicable Federal law, and no such merger ... shall

be subject to sections 132 through 147 [Section 17:9A-132

through Section 17:9A-147] or to any other law of this

State ... (Emphasis supplied).

Conversely, section 148 C provides for explicit appli-

cation of sections 132-147 where the resulting bank is state

chartered. Similarly, 12 U.S.C. Section 215a provides for

Comptroller approval only when the resulting bank is na-

tional: Thus, Defendants argue, there is a clear, concise

State and Federal statutory framework for mutually ex-

clusive supervision.

Plaintiffs, they conclude, “‘seek to overturn a century

and a half of Congressionally mandated exclusively Federal

regulation of national bank mergers. They seek to impose

state standards on a matter which state law holds is solely

within the purview of Federal law. They seek judicial re-

peal of a state statute which, by its terms, specifically

reiects their gloss on this transaction, has been repeatedly

affirmed by the State Legislature and was found to have

continuing vitality by the New Jersey State Attorney Gen-

eral as recently as February 1985. In addition, Plaintiffs

assert a claim under the New Jersey Antitrust Act which

3la

is expressly precluded by the terms of that Act.” Def. Br.

at 11.

Under the Federal Bank Merger Act, 12 U.S.C. Section

1828 et seq., neither state law nor state agencies have

any authority to regulate or review either the competitive

aspects, “the public interest’’ or ‘‘the convenience and

needs of the community to be served’’ with respect to

mergers resulting in national banks. See 12 U.S.C. Section

1828(cX5). That review is performed by ‘‘the Comptroller

of the Currency if the . . . resulting bank is to be a national

bank.”’ See 12 U.S.C. Section 1828(c\2A). Only the Comp-

troller has jurisdiction to review the proposed merger un-

der the Federal standards in such cases. See 12 U.S.C.

Section 1828(cX2\A). Moreover, in any judicial review of

the Comptroller’s decision only the Federal antitrust stand-

ards embodied in the Bank Merger Act may be applied.

12 U.S.C. Section 1828(cX7\B) provides:

In any judicial proceeding attacking a merger

transaction approved under paragraph (5) on the

grounds that the merger transaction alone and

of itself constituted a violation of any antitrust

laws other than section 2 of Title 15, the stand-

ards applied by the Court shall be identical with

those that the banking agencies are directed to

apply under paragraph (5).

12 U.S.C. Section 1828(cX8) provides : For the

purposes of this subsection, the term “antitrust

laws’ means [The Sherman Act, the Clayton Act]

. and any other acts in pari materia.

These standards displace any other standards or laws,

including state laws and thus, the standard embodied in

any other laws, if to the contrary, must yield to the stand-

ards in the Bank Merger Act. 12 U.S.C. Section 1828(c\7)

and (c\X8).

But there are no applicable standards to the contrary

here, in recognition of the fact that, as explicated by the

32a

New Jersey State Legislature in N.J.S.A. 17:9A-148, that

mergers into national banks under national bank charters

are beyond the power of the state to regulate. See also

N.J.S.A. 56:4-5(bX7). While other activities of nationally

chartered banks are subject to State law to the extent

that Congress has so specified or to the extent that there

is no inconsistency with or infringement of Federal law,

it is the act of merger which is the thrust of this case,

and as to that, the state has no role.‘

‘ Plaintiffs’ attempt to bring this action within the purview of the

Bank Holding Company Act, 12 U.S.C. at Section 1842, is unavailing.

That statute provides, in pertinent part:

(a) It shall be unlawful except with the prior approval of the Board

[of Governors of the Federai Reserve System] to be taken that causes

any company to become a bank holding company; two, for any action

to be taken that causes a bank to become a subsidiary of a bank holding

company; three, for any bank holding company to acquire direct or

indirect ownership or control of any voting shares of any bank if, after

such acquisition, such company will directly or indirectly own or control

more than five per centum of the voting shares of such bank; four,

for any bank holding company or subsidiary thereof, other than a bank,

to acquire all or substantially all of the assets of a bank; or, five, for

any bank holding company to merge or consolidate with any other bank

holding company. 12 U.S.C. Section 1842 (emphasis supplied).

Despite plaintiffs’ characterization, the proposed transaction they

challenge does not fit within any of the above-described categories.

Clearly, subsections (1) and (2) of the Act do not, by their terms, apply

to this merger, which will result in neither the creation of a bank

holding company nor the creation of a new subsidiary of a bank holding

company. As to subsection (3), First Fidelity Bancorporation, of which

FFBSJ is a subsidiary, will acquire no stock whatsoever as a result of

this merger. Further, subsection (4) explicitly exempts bank mergers.

and subsection (5), which describes the merger of two bank holding

companies, is clearly inapposite.

While Plaintiffs rely on the Third Circuit’s decision in Girard Bank

v. Board of Governors of Federal Reserve, 748 F.2d 838, 841, (3rd

Circuit 1984) for the proposition that the Bank Holding Company Act

applies to this proposed merger, that case is inapplicable here. While

Girard involved a transaction in which a bank holding company acquired

control over the voting shares of a bank—a transaction to which sub-

33a

One of the few things on which the parties agree in the

veritable mountain of paper filed on this motion is that

the determination as to whether the case arises under the

laws of the U.S. must be made on the face of the complaint

without regard to defenses that may be raised.

Despite the parties’ characterization, the instant case

does not present a classic pre-emption issue and it is crys-

tal clear from the face of the complaint that the Federal

question at issue herein is not merely the spectre of a

pre-emption defense ‘‘lurking in the background,” Gully v.

First National Bank in Meridian, 289 U.S. 109, 117 (1936),

which would be insufficient to warrant removal. Franchise

Tax Board, supra; Long Island R.R. Co. v. United Trans-

portation Union, 484 F. Supp. 1290 (S.D.N.Y. 1980).

Rather, this is a situation in which the Plaintiffs’ claim is

“exclusively governed by Federal law, so that the

[Plaintiffs] necessarily [are] stating a Federal cause of ac-

tion,’’ although they have couched it in terms of State law

asserted against the merger of national banks. Despite

Plaintiffs’ references to state law, it is the merger of two

section (3) would apply—the ‘nstant case does not. Defense counsel has

represented that the proposed merger at issue herein will involve "no

acquisition of any bank stock by [First Fidelity] Bancorporation,”’

Defendant’s Reply Memorandum at 3, and has indicated in open court

that the holding company wil! not even accept delivery of any bank

stock certificates. Accordingly, the fact that subsection (3) does not

expressly exempt bank mergers is of no moment. Stated simply, the

Bank Holding Company Act does not apply to this merger of two

national banking associations, which is explicitly exempt from coverage

by subsection (4), the on'y subsection which might arguably apply.

In Vial v. First Commerce Corp., 564 F. Supp. $50 (E.D. Louisiana

1983), the Court held that “(t]he words in the statute ‘other than a

bank’ clearly show the intention of Congress not to require a bank

acquiring the assets of another bank to obtain Board approval.” Id. at

658, quoting Leuthold v. Camp, 273 F. Supp. 695, 702, (D. Montana

1967), affirmed, 405 F. 2d 499 (9th Circuit 1969). This Court agrees

with the interpretation of Section 1842 adopted in Vial. The merger

at issue herein is beyond the reach of the Bank Holding Company Act.

34a

national banking associations that Plaintiffs seek to block,

and seek it on the face of their complaint. See, e.g., Comp.

9 Para. F). 14A Wright & Miller, Federal Practice and

Procedure Section 3722 at 273 (and cases cited therein.)

See also Federated Department Stores, Inc. v. Moitie, 452

U.S. 394, 397, n. 2 (1981) (approving the lower courts’

finding that removal was proper where Plaintiff's pur-

portedly state law claims were in fact artfully pled Federal

claims which were previously litigated).

Thus, this is not a case in which the Court must de-

termine whether Federal law has pre-empted the field, but

one in which the state law which plaintiffs invoke expressly

indicates that Federal law controls the question they raise.

In this scenario, it is incumbent upon this Court to assert

jurisdiction.

Nevertheless, this Court can offer these Plaintiffs no

relief at this juncture. As Plaintiffs themselves readily ad-

mit, they cannot state a claim under Federal law until

such time as the Comptroller of the Currency acts on the

merger proposal. Although Plaintiffs made that observa-

tion as a corollary to their assertion that there is state

jurisdiction to entertain their claims, the cause of action

they characterize as a state law concern is, as set forth

hereinbefore, clearly one for this Court. Hence, they do

not make out a state law claim, and their Federal! claims

are premature.

The Third Circuit’s decision in Trent Realty v. First

Federal Savings & Loan Association, 657 F. 2nd 29, 35

(8rd Circuit 1981), is not to the contrary. That case merely

reaffirmed the well-settled principle that the existence of

Federal pre-emption as a defense was not a sufficient

ground for removal. See also Home Federal Savings &

Loan Association v. Insurance Department of Iowa, 571

F. 2d 423 (8th Circuit 1978); Washington v. American

League of Professional Baseball Clubs, 460 F. 2nd 654

(9th Circuit 1972). In a footnote, the Court in Trent Realty

35a

expressly distinguished Federated Department Stores v.

Moitie, supra, suggesting that Moitie did not involve a pre-

emption issue, but one in which ‘“‘the Court refused to

permit the Plaintiffs to avoid Federal removal jurisdiction

by ‘artfully’ casting their ‘essentially Federal law claims’

as State law claims.’’ Trent Realty, supra at 35, n.2.,

quoting Moitie, supra. The Trent Realty court noted that

the reference to “pre-emption” in Justice Brennan’s dis-

sent in Moitie actually referred to a situation where, as

here, ‘‘The complaint, ‘though ostensibly grounded solely

on state law, is actually grounded on a claim in which

Federal law is the exclusive authority.’ ’’ id.

The instant case only involves ‘“‘pre-emption” in the

sense in which Justice Brennan used that term in his dis-

sent in Moitie. Rather than a situation in which Federal

banking and antitrust law have completely pre-empted the

field, this case involves a coordinated statutory structure

in which the State Statute acknowledges and defers to

Federal regulation of national bank mergers.

This reading of the law at issue in this case comports

with that expressed by the New Jersey Commissioner of

Banking in response to the Plaintiffs’ request that she

disapprove the pending merger of Defendant banks. As

Commissioner Parell made clear, she lacks jurisdiction to

act in this matter, which is purely one of Federal concern.

See letter of Commissioner Parell to William S. Greenberg,

dated July 1, 1985, attached to Metzger Affidavit. As no

Federal judicial review of the proposed merger can be

conducted at this time, and this Court will not entertain

any pendant State claims, the complaint must be dis-

missed.

The parties to this action have also cross-moved for the

imposition of sanctions—specifically, attorneys’ fees, ex-

penses, and costs. Defendants contend that this Court may

impose such sanctions under Rule 11 and 28 U.S.C. Section

1927, and pursuant to its inherent power to punish the

36a

willful abuse of judicial process. Plaintiffs argue that it is

Defendants who should suffer these sanctions for their

“‘baseless”’ removal of this action. For the reasons set forth

below, no sanctions will be imposed on either party.

As the Notes of the Advisory Committee on the 1983

Amendment to this Rule 11 states:

The new language stresses the need for some

prefiling inquiry into both the facts and the law

to satisfy the affirmative duty imposed by the

rule. The standard is one of reasonableness under

the circumstances. See Kinee v. Abraham Lincoln

Federal Savings & Loan Association, 375 F.

Supp. 975 (E.D. Pennsylvania 1973). This stand-

ard is more stringent than the original good-faith

formula and thus it is expected that a greater

range of circumstances will trigger its violation.

See Nemoroff v. Abelson, 620 F. 2nd 339 (2d

Circuit 1980).

The rule is not intended to chill an attorney’s

enthusiasm or creativity in pursuing factual or

legal theories. The Court is expected to avoid

using the wisdom of hindsight and should test

the signer’s conduct by inquiring what was rea-

sonable to believe at the time the pleading, mo-

tion, or other paper was submitted. Thus, what

constitutes a reasonable inquiry may depend on

such factors as how much time for investigation

was available to the signer; whether he had to

rely on a client for information as to the facts

underlying the pleading, motion, or other paper;

whether the pleading, motion, or other paper was

based on a plausible view of the law; or whether

he depended on forwarding counsel or another

member of the bar.

Advisory Committee Note, Amendments to Rules, 97

F.R.D. 165, 198-199.

37a

Thus, to comply with Rule 11, an attorney must take

care to determine, prior to filing, that there is a sound

basis in fact and law for the pleadings he generates. Gold-

man v. Belden, 580 F. Supp. 1373, 13881 (W.D.N.Y. 1984),

vacated on other grounds, 754 F. 2nd 1059 (2d Circuit

1985). Failure to do so may result in the imposition of

sanctions for filing frivolous papers. Andre v. Merrill Lynch

Ready Assets Trust, 97 F.R.D. 699, 700 (S.D.N.Y. 1983).

Under section 1927, sanctions will be imposed upon an

attorney personally only upon a showing of willful bad

faith. Baker Industries v. Cerberum Limited, 764 F. 2nd

204, 208 (8rd Circuit 1984); United States v. Blodgett, 709

F. 2nd 608, 610 (9th Circuit 1983); United States v. Ross,

535 F. 2d 346, 350 (6th Circuit 1976). Where such egre-

gious conduct is found, the decision of whether to impose

sanctions is committed to the sound discretion of the Dis-

trict Court. Baker Industries, supra at 210; Mobil Oil Corp.

v. Indep. Oil Workers Union, 679 Fed. 2d 299, 305 (3d

Circuit 1982)[.]

As this Court has determined that the case was properly

removed here, Plaintiffs’ ‘‘baseless removal’’ claim must

be rejected out of hand.

As to Defendants’ motion, this Court simply does not

find lack of reasonableness much less intentional miscon-

duct on the part of the Plaintiffs or their attorneys. They

have chosen the wrong forum—State Court —to litigate

the ultimate issue in this case. Also, they have asked that

court to make a determination which is in fact irrelevant

to the merger they challenge in this action. Nevertheless,

particularly given the somewhat involved Federal/State

statutory scheme in the banking field, the imposition of

sanctions would be inappropriate in this case. Accordingly,

both parties’ motions to impose sanctions will be denied.

The Court will enter an order referencing this opinion.

emcees

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