366 F.3d 982 (9th Cir. 2004), 03-15305, Community Bank of Arizona v. G.V.M. Trust

Docket Nº:03-15305.
Citation:366 F.3d 982
Party Name:COMMUNITY BANK OF ARIZONA, National Association, Plaintiff-counter-defendant-Appellee, v. G.V.M. TRUST; Dallas C. Gant, Jr.; Gary E. Johnson Ira; Pauline Johnson Ira; Gary E. Johnson; Timothy Johnson; Kathleen Jones Ira; Kathleen Jones Self-Directed Ira; Thomas G. Jones Ira; Thomas G. Jones Self-Directed Ira; Kathleen Jones; Thomas G. Jones; Vance
Case Date:May 07, 2004
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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366 F.3d 982 (9th Cir. 2004)

COMMUNITY BANK OF ARIZONA, National Association, Plaintiff-counter-defendant-Appellee,

v.

G.V.M. TRUST; Dallas C. Gant, Jr.; Gary E. Johnson Ira; Pauline Johnson Ira; Gary E. Johnson; Timothy Johnson; Kathleen Jones Ira; Kathleen Jones Self-Directed Ira; Thomas G. Jones Ira; Thomas G. Jones Self-Directed Ira; Kathleen Jones; Thomas G. Jones; Vance B. Miller; and Vance B. Miller, Trustee for Miller Clinic, Ltd. Profit Sharing Plan, Defendants-counterclaimants-Appellants.

No. 03-15305.

United States Court of Appeals, Ninth Circuit

May 7, 2004

Submitted March 12, 2004. [*]

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Richard A. Segal, Gust Rosenfeld, P.L.C., Phoenix, AZ, for the defendants/counterclaimants-appellants.

Peter W. Carter, Dorsey & Whitney LLP, Minneapolis, MN, for the plaintiff/counter-defendant-appellee.

Appeal from the United States District Court for the District of Arizona; Paul G. Rosenblatt, District Judge, Presiding. D.C. No. CV-02-00516-PGR.

Before HALL, T.G. NELSON, and GRABER, Circuit Judges.

GRABER, Circuit Judge.

We must decide whether Arizona's general corporate law appraisal procedures or the default appraisal procedures set out in the National Bank Consolidation and Merger Act ("Act"), 12 U.S.C. § 215a, govern the appraisal of dissenting shareholders' shares when an Arizona state bank merges into a national banking association. The question is one of first impression in this circuit. We hold that, when a state has enacted no statute providing for the appraisal of dissenters' shares in the specific context of banking, the default appraisal procedures of the federal Act apply. Therefore, we affirm.

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FACTUAL AND PROCEDURAL BACKGROUND

A majority of the shareholders of Plaintiff Community Bank of Arizona, an Arizona state-chartered banking corporation, voted to merge into the New Community Bank of Arizona, a national bank. The notice announcing the special meeting to vote on the proposed merger also set the value of each share of Plaintiff's common stock at $119.86. The notice stated that, in order to perfect their dissenters' rights, dissenting shareholders "must carefully follow the procedures prescribed by Section 215a of the [Act], 12 U.S.C.§ 215a."

Instead, Defendants--G.V.M. Trust and several other dissenting shareholders of Community Bank of Arizona--demanded payment of the fair value of their shares pursuant to Arizona Revised Statutes §§ 10-1320 to 10-1331, asserting that state law rather than federal law supplied the relevant appraisal procedure. 1 In their written demand for payment, Defendants pegged the fair value of their shares at $187 each.

Plaintiff then commenced this action in district court, seeking a declaration that

the merger of New Community Bank and Community Bank, and all issues related to that merger, are governed by the [Act], and that any dissenting shareholders who seek additional consideration for their shares must pursue the appraisal proceeding under the auspices of the Comptroller of the Currency set forth in 12 U.S.C. § 215a.

Defendants duly filed an answer and counterclaim. The answer asked the district court to declare that the dissenters' rights should be determined in accordance with the procedure set forth in Ariz.Rev.Stat. §§ 10-1320 to 10-1331. The counterclaim requested payment in favor of each defendant in the amount of $187 per share owned.

The district court granted summary judgment in favor of Plaintiff, holding that the procedures set forth in the federal Act, rather than the procedures set forth in Arizona statutes, governed the valuation of Defendants' shares. This timely appeal followed.

STANDARD OF REVIEW

We review de novo a district court's grant of summary judgment. United States v. City of Tacoma, 332 F.3d 574, 578 (9th Cir.2003). We may affirm a district court's grant of summary judgment on any ground supported by the record. United States ex rel. Ali v. Daniel, Mann, Johnson & Mendenhall, 355 F.3d 1140, 1144 (9th Cir.2004). We also review de novo a district court's interpretation and construction of state and federal law. Feature Realty, Inc. v. City of Spokane, 331 F.3d 1082, 1086 n. 3 (9th Cir.2003); SEC v. McCarthy, 322 F.3d 650, 654 (9th Cir.2003).

DISCUSSION

A. Section 215a(d) of the Act

At the heart of this dispute lies the proper interpretation of 12 U.S.C. § 215a(d), the subsection of the Act addressing the appraisal of dissenting shareholders' shares in the context of the merger of a state bank into a national banking association. As its title reveals, § 215a regulates the "[m]erger of national banks or State banks into national banks."

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Section 215a(a) addresses the merging bank's requirement to notify its shareholders of a plan of merger and to have that plan

ratified and confirmed by the affirmative vote of the shareholders of each such association or State bank owning at least two-thirds of its capital stock outstanding, or by a greater proportion of such capital stock in the case of a State bank if the laws of the State where it is organized so require....

12 U.S.C. § 215a(a)(2).

Section 215a(b) secures the right of a shareholder of the merging state or national bank who dissents to the vote in favor of a merger--a dissenting shareholder--to receive the value of the shares owned in exchange for the surrender of the merging bank's stock certificates, once the merger is approved. Section 215a(b) also explains the procedure that the dissenting shareholder must follow to perfect that right.

Section 215a(c) sets out the process by which the dissenting shareholder's shares are appraised. Under § 215a(c), the merging bank's board of directors selects one appraiser, the dissenting shareholders select another, and the two appraisers so chosen select a third. The appraised value agreed upon by any two of the three appraisers shall govern. However, any dissenting shareholder who is dissatisfied with the appraised value arrived at by this method has the right to appeal to the Comptroller of Currency, "who shall cause a reappraisal to be made which shall be final and binding." 12 U.S.C. § 215a(c).

Section 215a(d), the subsection at issue here, is something of a "clean-up" provision with respect to the shares of dissenting shareholders. Section 215a(d) discusses, among other things, particular aspects of the Comptroller's own appraisal of shares. For example, it provides for an initial appraisal by the Comptroller when two appraisers fail to agree on a third appraiser, or when the appraisers fail to determine the value of dissenters' shares. Section 215a(d) requires the merging bank to pay the expenses of the Comptroller in making an appraisal or reappraisal. It also sets out the procedure for auctioning the surrendered shares of dissenting shareholders and paying to the dissenting shareholders any amount by which the auction price for those shares exceeds their appraised value. Finally, § 215a(d) contains the following provision concerning appraisal procedures for merging state banks:

The appraisal of such shares of stock in any State bank shall be determined in the manner prescribed by the law of the State in such cases, rather than as provided in this section, if such provision is made in the State law; and no such merger shall be in contravention of the law of the State under which such bank is incorporated.

12 U.S.C. § 215a(d).

The parties' dispute concerns the scope of § 215a(d)'s deference to state law. The statute requires the appraisal to be "in the manner prescribed by the law of the State in such cases ... if such provision is made in the State law." Id. (emphasis added). However, the federal statute itself does not define the term "such cases" or the term "such provision." Plaintiff argues that by including the conditional phrase "if such provision is made in the State law," Congress intended to defer to state law only when a state has enacted a statute that regulates the appraisal remedy specifically in the context of bank mergers. For their part, Defendants contend that, because nothing in the statute limits Congress' intended deference to state law to a state's banking law, a proper interpretation of the federal Act requires the use of a state's general corporate law appraisal

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procedures whenever a shareholder of a state bank dissents from a plan of merger under § 215a.

Defendant's interpretation, however, would effectively render meaningless the default appraisal procedures, outlined in §...

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