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

• Citation: 269 F. 4
• Decision Date: 19 November 1920
• Docket Number: 3552.
• Parties: AMERICAN BANK & TRUST CO. et al. v. FEDERAL RESERVE BANK OF ATLANTA, GA., et al.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

269 F. 4

AMERICAN BANK & TRUST CO. et al. v. FEDERAL RESERVE BANK OF ATLANTA, GA., et al.

No. 3552.

United States Court of Appeals, Fifth Circuit.

November 19, 1920

Alex W Smith, of Atlanta, Ga., William H. Watkins, of Jackson Miss., Orville A. Park, of Macon, Ga., T. M. Stevens, of Mobile, Ala., M. M. Baldwin, of Birmingham, Ala., Smith Hammond & Smith, of Atlanta, Ga., Stevens, McCorvey & McLeod of Mobile, Ala., Tillman, Bradley & Morrow, of Birmingham, Ala., and Watkins & Watkins, of Jackson, Miss., for appellants.

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

Before WALKER and BRYAN, Circuit Judges, and GRUBB, District Judge.

GRUBB District Judge.

This is an appeal from a decree in equity of the District Court of the United States for the Northern District of Georgia, dismissing the bill or petition for want of equity. The suit was originally brought in the superior court of Fulton county, Ga., and was removed to the District Court of the United States for the Northern District of Georgia by the appellee, the Federal Reserve Bank of Atlanta. The appellants were state banks of Georgia, not members of the federal reserve system. The relief prayed for in the petition filed in the state court was an injunction against the appellees, restraining them from collecting checks drawn on appellants, 'except in the usual and ordinary channel of collecting checks through correspondent banks or clearing houses '; the purpose being to prevent collection through agents presenting the checks over the banks' counter. The appellants moved to remand the cause to the state court, which was denied, and the bill was dismissed on the appellees' motion to dismiss for want of equity. The appeal presents the questions of the correctness of the rulings of the District Court (1) in refusing to remand the case and (2) in dismissing the bill on the merits.

1. The jurisdictional amount is conceded to be present. There was no diversity of citizenship claimed. Removal was granted because the cause was considered to be one arising under the Constitution and laws of the United States-- this because (1) the defendant, the Federal Reserve Bank, was incorporated under an act of Congress, and was neither a railroad incorporation nor a national banking association; and (2) because the appellants' petition or bill, as amended, introduced a federal question into the record, in that it charged the acts of the defendants, sought to be enjoined, to be ultra vires of the powers of the appellee, the Reserve Bank, granted by the Federal Reserve Act (38 Stat. 251) and its amendments. If the District Court had original jurisdiction of the cause of action for either or both of the reasons mentioned, the cause was properly removed. The appellants contend that the Federal Reserve Bank is a national banking association, the presence of which as a party defendant would not introduce a question arising under the laws of the United States, and that there is no other such question presented by the appellants' petition or bill.

We think the United States District Court had original jurisdiction of the cause of action for both of the reasons assigned. The case of Osborn v. Bank of the United States, 9 Wheat. 738, 6 L.Ed. 204, supported by many subsequent decisions of the Supreme Court, settles the question of the jurisdiction of the federal court in cases in which one of the parties is a corporation which owes its creation to an act of Congress, unless another act of Congress has withdrawn such jurisdiction. Nor is it important whether the federal incorporation occupies the position of plaintiff or of defendant in the action. This is true, unless a long line of Supreme Court decisions, in which jurisdiction was sustained upon this ground, without reference to the position of the corporation in the lineup of the parties, be disregarded. From this follows the right of a federal incorporation, made a defendant in a cause in a state court, to remove the cause to the federal court, unless prohibited by an act of Congress. Texas & Pacific Railway Co. v. Cody, 166 U.S. 606-609, 17 Sup.Ct. 703, 41 L.Ed. 1132; Washington & Idaho R.R. Co. v. Coeur d'Alene Ry. Co., 160 U.S. 77-93, 16 Sup.Ct. 231, 40 L.Ed. 355. Congress has withdrawn jurisdiction only in cases of railroad companies and national banking associations.

The contention of appellants is that the Federal Reserve Bank of Atlanta is a national banking association, within the meaning of the Act of July 12, 1882, c. 290 (22 Stat. 162), the Judiciary Act of March 3, 1887 (24 Stat. 552), as corrected by the Act of August 13, 1888, c. 866, Sec. 4 (25 Stat. 436), and by section 24 of the Judicial Code of 1911 (Comp. St. Sec. 991). The prohibiting clause of the latter is:

'And all national banking associations established under the laws of the United States shall for the purpose of all other actions against them, real, personal, or mixed, and all suits in equity, be deemed citizens of the states in which they are respectively located.'

If this language applies to the Federal Reserve Banks, it withdraws jurisdiction from the federal courts in cases in which they are parties, and in which no other ground of jurisdiction appears in the record. We do not think it can be held to apply. At the time of the original limitation of jurisdiction in the Act of July 12, 1882, and at the time of its renewals in the Judiciary Act of 1887, and in the Judicial Code of 1911, federal reserve banks were unknown. The only national banking associations, then existent, were the national banks organized under the national banking laws. The question is whether Congress intended to include within this designation banks to be subsequently created of the nature of the federal reserve banks. The answer will depend upon the result of a comparison instituted between the national banks and the reserve banks, and is to be determined, not so much by points of identity (for all banks have many such), but by points of difference.

The important differences between national banks and reserve banks, so far as the solution of this question is concerned, are (1) the disparity in the number of each class, and (2) that the reserve banks are banks of deposit and discount for other banks only, and not for the general public. There are many other important differences, but we think the two mentioned are determinative. The one class, small in number, acts as governmental fiscal agencies, with no general clientele; the other class serves the public generally and locally, and they are necessarily numerous. That all the provisions of the National Banking Act could be made applicable appropriately or safely to the class of reserve banks is clearly impossible. Yet the same reasoning that would apply the limitation of jurisdiction imposed upon national banks to reserve banks would make it necessary to apply all other limitations against and grants in favor of national banks to reserve banks. If the reserve banks are national banking associations, within the meaning of the Act of July 12, 1882, and its successors, for one purpose, they are so for all purposes, of the national banking laws. Such a conclusion would be a dangerous one, and lead to unforeseeable consequences.

We think it safer to conclude that Congress intended national banking associations to include those only that were then being created, or those of a kindred nature that might thereafter be created, and that the differences between ordinary banks of deposit and discount, with the public as customers, and banks whose only permissible stockholders and customers are the government and other banks, and which are more governmental agencies than private institutions, are not within the purview of national banking associations, as contemplated by Congress when it enacted the limitation upon the jurisdiction of national banking associations. In view of the paucity in number of the reserve banks, and their more intimate relation to the government, and their more remote contact with the general public, Congress may well have found reason not to withdraw the jurisdiction of the federal courts from them by reason of their federal incorporation, though it had done so in the case of national banks. There is no express withholding of such jurisdiction. To imply it would necessarily lead to other implications so far-reaching and difficult to anticipate that we do not think it should be implied.

If the fact of federal incorporation of the reserve banks confers jurisdiction on the federal court, the fact that the officers of the appellee bank are made individual codefendants with it, and that they are citizens of Georgia, does not prevent removal. Matter of Dunn, 212 U.S. 374, 29 Sup.Ct. 299, 53 L.Ed. 558.

2. The amendment to the bill or petition of appellants charged that the acts of the appellees sought to be enjoined, if committed, would be committed in excess of the powers of the Federal Reserve Bank of Atlanta, and in violation of the provision of the Federal Reserve Act. Paragraph 9 of the amendment charges that--

'The coercive measures, now threatened, are not only not authorized or required by the terms of the Federal Reserve Act, which includes the charter of defendant reserve bank, but express provision is found therein for the performance of all clearing house functions, therein imposed in the regular way and through orderly banking channels, applicable to nonmember banks, as well as member banks. Wherefore plaintiffs charge that the threatened coercive measures are ultra vires the charter of defendant Reserve Bank, and the execution thereof by the individual defendants would be illegal and should be enjoined.'

The purpose of the petition or bill was not to enforce the...