379 U.S. 411 (1965), 26, Whitney National Bank in Jefferson Parish

Docket Nº:No. 26
Citation:379 U.S. 411, 85 S.Ct. 551, 13 L.Ed.2d 386
Party Name:Whitney National Bank in Jefferson Parish
Case Date:January 18, 1965
Court:United States Supreme Court
 
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379 U.S. 411 (1965)

85 S.Ct. 551, 13 L.Ed.2d 386

Whitney National Bank in Jefferson Parish

No. 26

United States Supreme Court

Jan. 18, 1965

v. Bank of New Orleans & Trust Co.

Argued November 12, 1964

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Syllabus

A New Orleans-based national bank, desiring to expand but prohibited from operating branches beyond its home parish, formed a holding company which in turn organized a new national bank to operate in an adjoining parish. Pursuant to the Bank Holding Company Act of 1956, the Federal Reserve Board (FRB), after receiving favorable advice from the Comptroller of the Currency (Comptroller), held hearings on the application by the holding company. The FRB approved the plan on May 3,1962. The sole remaining action needed to enable the new bank to operate was a certificate of authority from the Comptroller acting under the National Bank Act. On June 9, 1962, three state banks brought this action in federal district court to restrain the Comptroller from issuing the certificate. On June 13, 1962, two respondent banks filed a petition with the FRB for reconsideration, which was denied as untimely and without substantial merit. Thereafter, on June 30, 1962, the Court of Appeals for the Fifth Circuit was asked to review the FRB action under the Bank Holding Company Act of 1956, which suit is still pending. On July 10, 1962, a Louisiana law was passed making it unlawful for any bank owned or controlled by a bank holding company to open, whether or not it had a charter or certificate to engage in banking. The District Court in this suit held that the Bank Holding Company Act of 1956 reserved to the States final authority to bar subsidiaries of bank holding companies, and that the Louisiana statute prevented the Comptroller from issuing the certificate. Accordingly, it issued a permanent injunction against the Comptroller. On appeal, the Court of Appeals held that the new bank would be but a branch of the old one, which was prohibited by the Banking Act

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of 1933, and therefore found it unnecessary to rule on the effect of the new Louisiana law.

Held: since the issues here concern essentially the organization and relationship of the holding company and the new national bank, matters within the cognizance of the FRB, rather than the Comptroller, upon whom the FRB's approval of a holding company plan is binding, the statutory scheme set forth in the Bank Holding Company Act of 1956 -- FRB determination, subject to review by a court of appeals -- should be followed. The FRB should have an opportunity to consider the effect of the supervening Louisiana statute, and the parties are given 60 days to proceed before the Court of Appeals for the Fifth Circuit to secure a remand to the FRB. That court has ample power to protect its jurisdiction and prevent the opening of the new bank pending resolution of the issues. Pp. 417-426.

116 U.S.App.D.C. 285, 323 F.2d 290, reversed and remanded.

CLARK, J., lead opinion

MR. JUSTICE CLARK delivered the opinion of the Court.

This suit is a facet of the complicated controversy between the Whitney National Bank of New Orleans (Whitney-New Orleans) and three of its state-chartered

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banking competitors over the establishment by Whitney-New Orleans of a national bank (Whitney-Jefferson) in Jefferson Parish, Louisiana, which adjoins the Parish of Orleans. In order to avoid the restrictions of the national [85 S.Ct. 554] banking laws as to branch banking1 and still tap the banking market in Jefferson Parish, Whitney-New Orleans resorted to the organization of a bank holding company. After approval of the plan by the Federal Reserve Board on May 3, 1962, two of the respondent banks filed this declaratory judgment action on June 9, 1962, seeking a declaration that the Comptroller of the Currency had no power to grant the necessary authority and praying in addition for injunctive relief restraining him from issuing a certificate of authority for the new bank.

Four days later, two of the respondent banks petitioned the Board for reconsideration of its approval of the Whitney application. Their petition was denied, and, on June 30, 1962, they sought judicial review of the Federal Reserve Board decision in the Court of Appeals for the Fifth Circuit.2 That suit is presently pending there, awaiting our decision here.

Meanwhile, in this suit, the United States District Court for the District of Columbia assumed jurisdiction and held on the merits that § 7 of the Bank Holding Company Act of 19563 reserved to the States final authority

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to prohibit the opening of subsidiaries of bank holding companies within their borders, and that Louisiana had adopted such a law (albeit subsequent to the approval of the plan involved here by the Federal Reserve Board)4 which prevented the Comptroller from issuing the certificate. A permanent injunction was issued against the Comptroller restraining the issuance of the authority. 211 F.Supp. 576. On appeal, the Court of Appeals upheld the jurisdiction of the District Court, rejecting the contention that the competitor banks lacked standing to sue. It related bank charters to semi-exclusive franchises conferring upon their holders a right to be free from the competition of a branch bank the operation of which was violative of the Banking Act of 1933, 12 U.S.C. § 36 (1958 ed.). On the merits, it concluded that the proposed Jefferson Parish bank would be but a branch of Whitney-New Orleans which was prohibited by the Act. It therefore found it unnecessary to pass upon the effect of Louisiana's law prohibiting the opening or operation of subsidiaries by bank holding companies. 116 U.S.App.D.C. 285, 323 F.2d 290. In view of tangle in which the parties had thus involved themselves and the national banking laws as well, we granted certiorari. 376 U.S. 948. We have concluded that the District Court for the District of Columbia had no jurisdiction to pass on the merits of the holding company proposal; that appropriate disposition of the controversy cannot be made without further consideration of the case by the Federal Reserve Board, where original exclusive jurisdiction rests; and that, since the application for review of its decision is

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now pending in the Court of Appeals for the [85 S.Ct. 555] Fifth Circuit, reasonable time should be allowed for that court to act. We therefore reverse these judgments and order dismissal of the complaint. But issuance of our judgment is stayed for a period of 60 days in order to give the parties time to move in Fifth Circuit for an order remanding that case to the Federal Reserve Board, and, in the event of such a remand, to permit the Court of Appeals to issue such orders as will protect its jurisdiction pending final determination of the matter.

I

The facts are undisputed. Whitney-New Orleans desired to extend its banking business into the expanding urban areas beyond the Parish of Orleans, its home base. It could not open branches beyond the parish line, because Louisiana law, La.Rev.Stat. § 6:54 (1950), applicable to national banks, prohibited its operating a branch bank outside of its home parish. After discussions with the Deputy Comptroller of the Currency, it was decided that the bank should establish a holding company (Whitney Holding Corporation) under federal law with a capital of $350,000 taken from the bank's undivided profits and represented by 5,600 shares of stock of the holding company to be distributed to the bank's shareholders. The holding company would then organize a new national bank, the Crescent City National Bank, with the $350,000 it had on hand. Whitney-New Orleans would then be merged into the Crescent City, and the resulting bank would be known as Whitney-New Orleans. The new Whitney-New Orleans bank would declare a dividend of $650,000 from its undivided profits which would go to its owner, the holding company. The latter would then organize, with this $650,000, another national bank, Whitney-Jefferson, which would be located in Jefferson Parish. The net result of the maneuver would be that

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the original stockholders of the old Whitney-New Orleans would own the holding company, which, in turn would own and operate both banks, i.e., the new Whitney-New Orleans and Whitney-Jefferson.

Approval of the stockholders of Whitney-New Orleans was first obtained, over 88% of the shares voting for the plan. It was then submitted to the Comptroller, who, on October 3, 1961, gave preliminary approval, subject to the action of the Federal Reserve Board and the consummation of the various transactions outlined. On July 14, 1961, applications were filed with the Board; thereafter notice was published in the Federal Register and three potential competitors expressed opposition. However, none of the respondents appeared or made any filings. After receiving the advice of the Comptroller pursuant to § 3(b) of the Bank Holding Company Act of 1956, 12 U.S.C. § 1842(b) (1958 ed.), which was favorable, the Board ordered a public proceeding to be held on January 17, 1962, "to afford further opportunity for the expression of views and opinions by interested persons." At this hearing, testimony was heard and opposition submitted by objecting stockholders and potential competitors, but none of the respondents took any part therein. The Board, by a 6-1 vote, approved the plan on May 3, 1962. This suit was filed on June 9, 1962. Thereafter, on June 13, 1962, a petition for reconsideration was filed with the Federal Reserve Board by two of the respondent banks, and was later joined by the Bank Commissioner of Louisiana. This application was denied on the ground of untimeliness, and because the Board found it "without substantial merit."...

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