118 F.3d 905 (2nd Cir. 1997), 155, Lee v. Board of Governors of the Federal Reserve System

Docket Nº:155, 420, Dockets 95-4134, 96-4008.
Citation:118 F.3d 905
Party Name:Matthew LEE; Vielka O. Peguero; Yvonne Santana; Inner City Press/Community on the Move Homesteader's Association, Petitioners, v. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM and the Office of Thrift Supervision, Respondents, U.S. Trust Corporation and Chase Manhattan Corporation, Intervenors. INNER CITY PRESS/COMMUNITY ON THE MOVE, and its mem
Case Date:July 02, 1997
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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118 F.3d 905 (2nd Cir. 1997)

Matthew LEE; Vielka O. Peguero; Yvonne Santana; Inner

City Press/Community on the Move Homesteader's

Association, Petitioners,

v.

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM and the

Office of Thrift Supervision, Respondents,

U.S. Trust Corporation and Chase Manhattan Corporation, Intervenors.

INNER CITY PRESS/COMMUNITY ON THE MOVE, and its members and

affiliates; South Bronx/Inner City Prospective Homeowners

Association; Inner City Community Development Loan Fund;

South Bronx/Inner City Small Business Alliance; Matthew Lee

and Vielka Peguero, Petitioners,

v.

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Respondent,

Chemical Banking Corporaton, the Chase Manhattan Corporation

(collectively, the "Holding Companies"), Chemical

Bank and the Chase Manhattan Bank, N.A.

(collectively, the "Banks"),

Intervenors.

Nos. 155, 420, Dockets 95-4134, 96-4008.

United States Court of Appeals, Second Circuit

July 2, 1997

Argued Jan. 13, 1997.

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Michael E. Deutsch, Barbara J. Olshansky, New York City (Renee Steinhagen, Laura Davis, Center for Constitutional Rights, Eric A. Klein, Cynthia Reed, New York City, of counsel), for Petitioners.

Matthew Lee, New York City, pro se.

Douglas B. Jordan, Washington, DC (James V. Mattingly, Jr., General Counsel, Richard M. Ashton, Associate General Counsel, Katherine H. Wheatley, Assistant General Counsel, Washington, DC, of counsel), for Respondent Board of Governors of the Federal Reserve System.

Aaron B. Kahn, Washington, DC (Carolyn J. Buck, Chief Counsel, Thomas J. Segal, Deputy Chief Counsel, Washington, DC, of counsel), for Respondent Office of Thrift Supervision.

Warren W. Traiger, New York City (Joseph Calluori, New York City, of counsel), for Intervenor U.S. Trust Corporation.

Mark Segal, New York City (Patricia M. Kelly, Betty Y. Yan, Chemical Bank Legal Department, New York City, of counsel), for Intervenor Chemical Banking Corporation and Chemical Bank.

Kent T. Stauffer, Matthew G. Leonard, New York City, for Intervenor Chase Manhattan Corporation.

Melvyn L. Cantor, Eric S. Kobrick, Simpson Thacher & Bartlett, New York City, for Intervenors Chemical Banking Corporation, The Chase Manhattan Corporation, Chemical Bank and The Chase Manhattan Bank, N.A.

Before: VAN GRAAFEILAND and LEVAL, Circuit Judges, and SQUATRITO, District Judge. [*]

VAN GRAAFEILAND, Circuit Judge:

At issue herein are two petitions brought pursuant to section 9 of the Bank Holding Company Act ("BHCA"), 12 U.S.C. § 1848, and section 10(j) of the Home Owners' Loan Act ("HOLA"), 12 U.S.C. § 1467a(j), seeking to overturn three orders of the Board of Governors of the Federal Reserve System ("the Board") and one order of the Director of the Office of Thrift Supervision ("OTS"). In action number 95-4134, Matthew Lee, Vielka Peguero, Yvonne Santana and Inner City Press/Community on the Move Homesteader's Association petition for review of the Board's orders approving Chase Manhattan Corporation's application to acquire certain businesses controlled by United States Trust Corporation ("UST"). In action number 96-4008, Inner City Press/Community on the Move, South Bronx/Inner City Prospective Homeowners Association, Inner City Community Development Loan Fund, South Bronx/Inner City Small Business Alliance, Lee and Peguero petition for review of the Board's order approving the merger of Chase into Chemical Banking Corporation. On May 16, 1996, this Court consolidated the two petitions for argument and decision.

The petition in 95-4134 involves a somewhat complicated arrangement between Chase and UST for the sale to Chase of UST's securities processing businesses. First, UST transferred all of its non-securities processing businesses to a newly created holding company, New UST Holdings Corporation ("New UST"). UST, then consisting of only the securities processing businesses, merged into Chase.

Because the transaction involved a merger of two bank holding companies and Chase's acquisition of a banking subsidiary, U.S. Trust Company of New York ("USTNY"), Chase was required to obtain the Board's approval pursuant to section 3 of the BHCA, 12 U.S.C. § 1842. Under this section, the Board, after receiving the recommendation of the Office of the Comptroller of the Currency ("OCC") or the applicable state supervisory agency, must evaluate an application pursuant to a number of factors: the anti-competitive effects of the proposal, the financial and managerial resources of the company and the banks involved and the "needs of the community to be served." 12 U.S.C. § 1842(c)(2).

Section 4(a) of the BHCA, 12 U.S.C. § 1843(a)(2), prohibits a bank holding company,

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such as Chase, from retaining "direct or indirect ownership or control of any voting shares of any company which is not a bank or bank holding company." The statute also prohibits bank holding companies from engaging in any activities other than those of banking or of managing or controlling banks, but exempts from this prohibition the ownership of:

shares of any company the activities of which the Board ... has determined (by order or regulation) to be so closely related to banking or managing or controlling banks as to be a proper incident thereto....

12 U.S.C. § 1843(c)(8). See Citicorp v. Board of Governors, 936 F.2d 66, 68 (2d Cir.1991), cert. denied, 502 U.S. 1031, 112 S.Ct. 869, 116 L.Ed.2d 775 (1992); National Ass'n of Cas. & Sur. Agents v. Board of Governors, 856 F.2d 282, 284 (D.C.Cir.1988), cert. denied, 490 U.S. 1090, 109 S.Ct. 2430, 104 L.Ed.2d 987 (1989). Because Chase would be acquiring two non-banking subsidiaries of UST, U.S. Trust Company of Wyoming ("USTWY") and Mutual Funds Service Company ("MFSC"), Chase filed a notice of its intent to engage in non-banking activities pursuant to § 1843(c)(8). See 12 C.F.R. § 225.23.

UST also needed the Board's approval under section 3 in order to form New UST (the new bank holding company) and was required to file notices pursuant to section 4(c)(8) to permit New UST to engage in the non-banking activities that UST previously performed. Moreover, because New UST would be acquiring UST's thrift subsidiary, UST also was required to obtain approval of the OTS pursuant to section 10(e) of HOLA, 12 U.S.C. § 1467a(e).

The petition in 96-4008 involves the Board's approval of a number of applications permitting the merger of Chase into Chemical. The mechanics of the transaction, put simplistically, entailed the merger of the two holding companies, the merger of each company's lead bank subsidiaries and the acquisition by Chemical of Chase's non-banking subsidiaries. The parties, therefore, were required to obtain approval of the Board pursuant to sections 3 and 4 of the BHCA as well as the approval of a number of other federal and state agencies not relevant here. Chase and Chemical filed the appropriate applications with the Board on October 3, 1995.

Under the Board's regulations implementing the BHCA, the public must be given notice of an application and may submit comments to the Board. See 12 C.F.R. § 262. Petitioner Inner City Press/Community on the Move ("ICP"), an association of low-income residents of New York City, presented the Board and OTS with a number of objections to both the Chase-UST applications and the Chase-Chemical applications. ICP's concerns were based principally on the Community Reinvestment Act ("CRA"), 12 U.S.C. §§ 2901 et seq. The CRA provides that "regulated financial institutions have [a] continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered." 12 U.S.C. § 2901(a)(3). To police this obligation, the CRA provides that a federal regulatory agency must "assess the institution's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods ... and ... take such record into account in its evaluation of an application for a deposit facility by such institution." 12 U.S.C. § 2903(a)(1) & (2). Nearly identical regulatory schemes implementing the CRA have been adopted by the Board and OTS. See 12 C.F.R. §§ 228 et seq.; id. §§ 563e et seq.

Petitioners' comments notwithstanding, each of the applications was approved by the appropriate federal agency. The Board approved the Chase-UST transaction pursuant to sections 3 and 4 of the BHCA in two orders dated July 24, 1995. OTS's approval of UST's application followed shortly thereafter on August 18, 1995. 1 On August 22, 1995, the three individual petitioners in number 95-4134 and ICP timely petitioned this Court for review. The Board approved the Chase-

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Chemical merger in an order dated January 5, 1996, and the petition to review that order in number 96-4008 followed on January 19, 1996. Original jurisdiction in this Court is based on 12 U.S.C. § 1848 and 12 U.S.C. § 1467a(j), each of which provides that any aggrieved party may seek review of an order of the Board or the OTS, respectively, in the United States Court of Appeals for the jurisdiction in which the party maintains its business.

In addition to defending the orders on their merits, respondents question whether any of the named petitioners have standing to pursue these matters, both because some failed to participate in the proceedings below and because none has alleged an injury flowing from the orders at issue sufficient to bring the matter within the case or controversy requirement of Article III.

For the reasons hereinafter discussed, we believe that petitioners have failed to demonstrate standing to pursue this litigation. However...

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