American Bank Trust Co v. Federal Reserve Bank of Atlanta, Ga

• Citation: 25 A.L.R. 971,65 L.Ed. 983,256 U.S. 350,41 S.Ct. 499
• Decision Date: 16 May 1921
• Docket Number: No. 679,679
• Parties: AMERICAN BANK & TRUST CO. et al. v. FEDERAL RESERVE BANK OF ATLANTA, GA., et al
• Court: United States Supreme Court

256 U.S. 350

41 S.Ct. 499

65 L.Ed. 983

AMERICAN BANK & TRUST CO. et al.

v FEDERAL RESERVE BANK OF ATLANTA, GA., et al.

No. 679.

Argued April 13 and 14, 1921.

Decided May 16, 1921.

Mr. Alexander W. Smith, of Atlanta, Ga., for appellants.

Messrs. Hollins N. Randolph and Robert S. Parker, both of Atlanta, Ga., for appellees.

[Argument of Counsel from pages 351-355 intentionally omitted] Mr. Justice HOLMES delivered the opinion of the Court.

This is a bill in equity brought by country banks incorporated by the State of Georgia against the Federal Reserve Bank of Atlanta, incorporated under the laws of the United States, and its officers. It was brought in a State Court but removed to the District Court of the United States on the petition of the defendants. A motion to remand was made by the plaintiffs but was overruled. The allegations of the bill may be summed up in comparatively few words. The plaintiffs are not members of the Federal Reserve System and many of them have too small a capital to permit their joining it—a capital that could not be increased to the required amount in the thinly populated sections of the country where they operate. An important part of the income of these small institutions is a charge for the services rendered by them in paying checks drawn upon them at a distance and forwarded, generally by other banks, through the mail. The charge covers the expense incurred by the paying bank and a small profit. The banks in the Federal Reserve System are forbidden to make such charges to other banks in the System. Federal Reserve Act of December 23, 1913, c. 6, § 13; 38 Stat. 263; amended March 3, 1915, c. 93; 38 Stat. 958; September 7, 1916, c. 461; 39 Stat. 752; and June 21, 1917, c. 32, §§ 4, 5; 40 Stat. 234, 235 (Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 9796). It is alleged that in pursuance of a policy accepted by the Federal Reserve Board the defendant bank has determined to use its power to compel the plaintiffs and others in like situation to become members of the defendant, or at least to open a nonmember clearing account with defendant, and thereby under the defendant's requirements, to make it necessary for the plaintiffs to maintain a much larger reserve than in their present condition they need. This diminution of their lending power coupled with the loss of the profit caused by the above mentioned clearing of bank checks and drafts at par will drive some of the plaintiffs out of business and diminish the income of all. To accomplish the defendants' wish they intend to accumulate checks upon the country banks until they reach a large amount and then to cause them to be presented for payment over the counter or by other devices detailed to require payment in cash in such wise as to compel the plaintiffs to maintain so much cash in their vaults as to drive them out of business or force them, if able, to submit to the defendant's scheme. It is alleged that the proposed conduct will deprive the plaintiffs or their property without due process of law contrary to the Fifth Amendment of the Constitution and that it is ultra vires. The bill seeks an injunction against the defendants collecting checks except in the usual way. The District Court dismissed the bill for want of equity and its decree was affirmed by the Circuit Court of Appeals (November 19, 1920). The plaintiffs appealed, setting up want of jurisdiction in the District Court and error in the final decree.

We agree with the Court below that he removal was proper. The principal dependant was incorporated under the laws of the United States and that has been established as a ground of jurisdiction since Osborn v. Bank of the United States, 9 Wheat. 738, 6 L. Ed. 204; Pacific Railroad Removal Cases, 115 U. S. 1, 5 Sup. Ct. 1113, 29 L. Ed. 319; Matter of Dunn, 212 U. S. 374, 29 Sup. Ct. 299, 53 L. Ed. 558. We shall say but a word in answer to the appellants' argument that a suit against such a corporation is not a suit arising under those laws within section 24 of the Judicial Code of March 3, 1911, c. 231, 36 Stat. 1087 (Comp. St. § 991). The contrary is established, and the accepted doctrine is intelligible at least since it is part of the plaintiffs' case that the defendant bank existed and exists as an entity capable of committing the wrong alleged and of being sued. These facts depend upon the laws of the United States. Bankers' Trust Co. v. Texas & Pacific Ry. Co., 241 U. S. 295, 306, 307, 36 Sup. Ct. 569, 60 L. Ed. 1010; Texas & Pacific Ry. Co. v. Cody, 166 U. S. 606, 17 Sup. Ct. 703, 41 L. Ed. 1132. See further Smith v. Kansas City Title & Trust Co., 255 U. S. 180, 41 Sup. Ct. 243, 65 L. Ed. 577, February 28, 1921. A more plausible objection is that by the Judicial Code, § 24, sixteenth, except as therein excepted...