323 F.2d 290 (D.C. Cir. 1963), 17672, Whitney Nat. Bank in Jefferson Parish v. Bank of New Orleans & Trust Co.

Docket Nº17672, 17681.
Citation323 F.2d 290
Party NameWHITNEY NATIONAL BANK IN JEFFERSON PARISH, Appellant, v. BANK OF NEW ORLEANS AND TRUST COMPANY et al., Appellees. James J. SAXON, Comptroller of the Currency, Appellant, v. BANK OF NEW ORLEANS AND TRUST COMPANY et al., Appellees.
Case DateAugust 14, 1963
CourtUnited States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

Page 290

323 F.2d 290 (D.C. Cir. 1963)

WHITNEY NATIONAL BANK IN JEFFERSON PARISH, Appellant,

v.

BANK OF NEW ORLEANS AND TRUST COMPANY et al., Appellees.

James J. SAXON, Comptroller of the Currency, Appellant,

v.

BANK OF NEW ORLEANS AND TRUST COMPANY et al., Appellees.

Nos. 17672, 17681.

United States Court of Appeals, District of Columbia Circuit.

Aug. 14, 1963

Argued May 24, 1963.

Petition for Rehearing En Banc Denied Oct. 17, 1963.

Page 291

Mr. Dean Acheson, Washington, D.C., with whom Messrs. W. Graham Claytor, Jr., and Brice M. Clagett, Washington, D.C., were on the brief, for appellant in No. 17, 672.

Mr. David L. Rose, Atty., Dept. of Justice, with whom Messrs. David C. Acheson, U.S. Atty., and Joseph D. Guilfoyle, Director of Operations, Civil Div., Dept, of Justice, and Morton Hollander, Atty., Dept. of Justice, were on the brief, for appellant in No. 17, 681.

Mr. Edward L. Merrigan Washington, D.C., for appellee Bank of New Orleans & Trust Co. and certain other appellees.

Mr. Bentley G. Byrnes, New Orleans, La., with whom Mr. Edward L. Merrigan, Washington, D.C., was on the brief, for appellee Louisiana State Bank Commissioner.

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Mr. James F. Bell, Washington, D.C., fled a brief on behalf of the National Ass'n of Supervisors of State Banks, as amicus curiae, urging affirmance.

Before WILBUR K. MILLER, WASHINGTON and DANAHER, Circuit judges.

WILBUR K. MILLER, Circuit Judge.

The City of New Orleans, Louisiana, is conterminous with the Parish of Orleans in which it is located. It is south of and adjacent to that part of Jefferson Parish which lies east of the Mississippi River. The latter is a populous area, already commercially and industrially active, in which further development is expected to be rapid and extensive.

The Whitney National Bank of New Orleans, by far the largest bank in Louisiana, with its main office and numerous branches in Orleans Parish, draws a substantial volume of business from customers in east Jefferson Parish. For some time it has desired to extend its operations into that area, but cannot establish branches therein because a Louisiana statute, 1 which is construed as forbidding such expansion by state banks, is made applicable to national banks in Louisiana by a federal statute. 2

After several years of studying alternate methods of doing indirectly what these statutes prohibited it from doing directly, The Whitney National Bank of New Orleans finally decided upon a corporate reorganization, the details of which included the formation of a holding company to own two new national banks: Crescent City National Bank, a mere conduit to exist temporarily in name only, and Whitney National Bank in Jefferson Parish, to be operated as we shall describe. All three new organizations were to be financed with funds furnished by Whitney of New Orleans.

Through elaborate maneuvers which will be explained later, the result would be that Whitney Holding Corporation would own all the stock, except qualifying shares, of Whitney of New Orleans and Whitney in Jefferson Parish; and the shares of Whitney Holding Corporation would be owned by the shareholders of the original Whitney of New Orleans in the same proportion as before. The holding company feature of the plan required the approval of the Board of Governors of the Federal Reserve System, and the remainder of it required the approval of the Comptroller of the Currency.

Commenting on the proposed plan, Whitney's president on October 28, 1961, advised his shareholders it had been decided to use the holding company device instead of the 'affiliated' bank plan which we approved in the Camden Trust case 3

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largely because, under the latter arrangement, it is impossible to attain and preserve identity of ownership of the two banks. He said:

'* * * From the depositors point of view, those in the smaller bank will be assured of the same management which directs the larger one without possibility of interruption. They will be assured of access to the large loan limits of the combined banks. They will have the security which arises out of the fact that the large and the small bank have identical ownership as well as management.

'We * * * elected to use a holding company rather than to get a group of stockholders to form an affiliate in Jefferson Parish. An affiliate by law must depend on ownership of a majority of the stock in the Jefferson Parish bank by Whitney Bank stockholders. Affiliate relationship can be suddenly terminated if stock ownership in the Jefferson Parish bank changes over a period of time until control ceases to be in the stockholders of the large New Orleans bank. This large bank cannot control those changes in stock ownership, and under the law when the control ceases to be in the stockholders of the large bank the two banks cannot have common officers or directors. As we view it, the change of ownership of the stock could be very embarrassing to either or both banks, -- even to the extent of having a bank which we no longer control still bearing the name 'Whitney National Bank.'

'Under the holding company approach the relationship is completely owned by the stockholders of the holding company who will be all the present stockholders of the Whitney National Bank and their successors.

'By reason of the common ownership of the two banks in a holding company there can arise no conflict of interest between them as there can between affiliated banks. There will be no minority stockholders to be affected.

'From the customer point of view there will be no conflict of interest arising out of the manner in which the customer sees fit to divide his business between the commonly owned banks in the two parishes. He will have the full benefit of a relationship with the large bank and its officers.

'Because of the permanent relationship between the large and the smaller bank, the smaller one can operate safely with a small capitalization.'

This plan was carried out almost completely. Whitney of New Orleans organized the Whitney Holding Corporation with $350, 000 initial capital furnished by it, with which Whitney Holding acquired the 'phantom' 4 Crescent City National Bank. The Whitney Bank then by consolidation transferred its assets to Crescent City National Bank (owned by Whitney Holding) and immediately changed Crescent City's name to The Whitney National Bank of New Orleans. Then the new Whitney of New Orleans furnished the Holding Corporation with $650, 000 5 with which the latter organized The Whitney National Bank in Jefferson Parish. And all the Holding Corporation's capital stock was distributed proportionately to the stockholders of the original Whitney of New Orleans.

All this was done with the approval of the Board of Governors of the Federal Reserve System (which had the duty of passing on the validity of the holding company arrangement) and of the Comptroller of the Currency. The only step not yet taken is the Comptroller's issuance to The Whitney National Bank in

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Jefferson Parish of a Certificate of Authority which will enable it to begin business.

On June 9, 1962, three Louisiana state banks 6 filed this suit against the Comptroller of the Currency, James J. Saxon, in the United States District Court for the District of Columbia. Their complaint, after describing Whitney's plan of reorganization and the various steps already taken pursuant to it, alleged that the Comptroller

'(19.) * * * is presently considering almost immediate issuance of his Certificate or Certificates of Authority which will enable the new branch bank facility to open and commence to operate a banking business at one or more locations in Jefferson Parish under the name of Whitney National Bank of Jefferson Parish.

'(20.) Plaintiffs verily believe that defendant, unless enjoined, will, without any notice of intention to plaintiffs, issue in the name of Whitney National Bank of New Orleans, or Whitney Holding Corporation, or Whitney National Bank of Jefferson Parish the aforesaid Certificate or Certificates of Authority, all in contravention of the letter, intent and purposes of Title 12 U.S.C. §§ 27, 36 and 1841, et seq., and that after said Certificate or Certificates are issued as aforesaid, plaintiffs will have no adequate remedy at law, either to compel revocation of same or to prevent the Whitney Bank from so operating in Jefferson Parish.

'(21.) Plaintiffs further allege that the unlawful and arbitrary issuance by defendant of his certificate or certificates, authorizing the Whitney National Bank to open and operate a new branch facility or facilities in Jefferson Parish as afore-said will cause great and irreparable damage to the banking business of said plaintiffs * * *.'

The relief prayed for was a declaration that 12 U.S.C. §§ 27, 36 and 1841 et seq., prohibit the Comptroller from issuing a Certificate of Authority to the newly-organized Whitney-Jefferson bank, and that he be preliminarily and permanently enjoined

'* * * from issuing to the Whitney National Bank, also known by the name of Crescent City National Bank, the Whitney Holding Corporation and/or the Whitney National Bank of Jefferson Parish, a Certificate or Certificates of Authority authorizing the establishment of new branch bank facilities by them or any of them in the name of Whitney National Bank or otherwise in Jefferson Parish, State of Louisiana * * *.'

After the complaint was filed, the Comptroller at first voluntarily withheld issuance of a Certificate of Authority to Whitney-Jefferson, but later indicated he would do so no longer. As a consequence, the plaintiffs moved for a temporary restraining order which...

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