SKOKIE FED. S. & L. ASS'N v. FEDERAL HOME LOAN BK. BD.

• Decision Date: 16 June 1975
• Docket Number: No. 73 C 2677.,73 C 2677.
• Citation: 400 F. Supp. 1016
• Parties: SKOKIE FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff, v. FEDERAL HOME LOAN BANK BOARD and Talman Federal Savings and Loan Association of Chicago, Defendants.
• Court: U.S. District Court — Northern District of Illinois

400 F. Supp. 1016

SKOKIE FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff, v. FEDERAL HOME LOAN BANK BOARD and Talman Federal Savings and Loan Association of Chicago, Defendants.

No. 73 C 2677.

United States District Court, N. D. Illinois, E. D.

June 16, 1975.

Thomas J. Houser, Thomas H. Morsch, Tomas M. Russell, Sidley & Austin, Chicago, Ill., for plaintiff.

Charles E. Allen, Paul E. McGraw, Daniel J. Goldberg, Harold B. Shore, Harvey Simon and Ernest M. Cohen, Gen Counsel, Federal Home Loan Bank Board, Washington, D. C., for Fed. Home Loan Bank.

Jerome P. Croke, Chicago, Ill., Roger C. Wiegand, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., Irwin Zatz, Arvey, Hodes, Costello & Burman, Chicago, Ill., for Talman Fed. Savings & Loan Ass'n.

MEMORANDUM OPINION

DECKER, District Judge.

Pursuant to its authority under 12 U.S.C. § 1461 et seq., the Federal Home Loan Bank Board ("Board") made two decisions of extraordinary economic significance to federally insured savings and loan associations in Illinois, and as might be expected, a flood of litigation ensued. The first decision was generally to allow these associations to establish de novo branches, a practice denied by state law to state incorporated banks.¹ The second decision was to grant applications made by specific savings and loan associations to open branches at various particular sites. Most of the questions raised by the litigation were resolved in the extensive opinion of my colleague, Judge Will, reported as Lyons Savings & Loan Ass'n v. Federal Home Loan Bank Bd., 377 F.Supp. 11 (N.D.Ill.1974). That opinion, which consolidated eight cases, addressed itself primarily to the constitutionality and the legal validity of the Board's first decision.

In Count IV of the present amended complaint, plaintiff Skokie Federal Savings & Loan Association ("Skokie") alleges a course of conduct between the defendant Board and the defendant Talman Federal Savings and Loan Association ("Talman"), through various persons, which allegedly unconstitutionally and otherwise illegally tainted with bias the decision of the Board to allow Talman to open a branch office at the Old Orchard Shopping Center in Skokie, Illinois. The other counts of the amended complaint are no longer the subject of contest.

The defendants have moved for summary judgment under Rule 56 of the Federal Rules of Civil Procedure, and plaintiff has opposed. As one of the benefits of the extensive discovery carried out in this case, each side has supplied the court with documents in support of its position. After careful review of these, and the legal arguments which have been presented in writing, the court finds that there are no material facts in dispute which could entitle plaintiff to any relief, and thus the court will grant summary judgment in favor of the defendants.

Facts

Most of the documents, including depositions, supplied by the plaintiff are irrelevant to its claim for relief; these materials are directed to the prospect that the Board's initial decision to allow associations to have branch offices at all in Illinois was improperly reached. That decision is not here challenged; Skokie was as much the beneficiary as Talman, and all the other federal savings and loan associations in Illinois. If Talman arguendo made an impermissible liaison in the course of the Board's first decision, Skokie has not demonstrated the continuation of such a liaison sufficiently to withstand defendants' motions. Moreover, the Board members who were responsible for the first decision, Preston Martin, Carl Kamp, Jr., and Thomas Clarke, did not make the decision allocating to Talman the Old Orchard site. Two entirely new members, Thomas Bomar and Grady Perry, had replaced these three, and defendants have submitted material showing that it was these two who made the Talman decision.² Given the foregoing perspective, the materials adduced by Skokie will be highlighted.³

The supposed improprieties between the Board and Talman all took place before the January 12, 1973, announcement by the Board that, under a change in policy, it would henceforth permit savings and loan associations to have de novo branches in Illinois. First, a communication took place between Henry Carrington, then both head of the Board's Office of Industrial Development and Secretary to the Board, and Clark Sutton, ultimately a consultant retained by Talman. Carrington advised Sutton, in December, 1971, of the feasibility of applying for a branch office of a savings and loan association in West Virginia, a state which had a nonbranching law similar to that in Illinois. Sutton was not at that time working on any Talman application. On Carrington's advice, Sutton had included in his West Virginia application letters from the Federal Reserve and the Federal Insurance Deposit Corporation which indicated the existence of affiliated banks in West Virginia. Sutton's theory (whether or not supplied by Carrington) was that the demonstration of de facto branch banking in a state might persuade the Board to allow de novo branch offices there for savings and loan associations. Carrington stood out in this respect for Sutton since Carrington had staunchly advocated the Board's allowance of de novo branch offices, as a matter of policy, in a third state, Florida.

A subsequent communication took place between Talman vice president Jerome Croke and then Board Chairman Martin, in July, 1972, in which Croke explained that de facto branch banking was indeed present in the State of Illinois. Although Talman was then submitting applications for a de novo branch and for the Old Orchard site, there is no indication that Talman was then (or logically, could ever be) in an adversary position to plaintiff or any other federal savings and loan association vis a vis the Board's decision to allow savings and loan associations to establish de novo branches.

Because of the Board's then pending policy against de novo branches in Illinois, the Talman application was returned at least once without being processed. Talman, of course, wanted the application to be processed (and granted), and toward that end, plaintiff maintains, Talman counsel Douglas Whitlock spoke with Board general counsel Charles Allen "threatening" to bring an action in mandamus. This conversation, in November, 1972, purportedly also included a demand that the application be accepted by January 15, 1973, when Talman would have to either forfeit earnest money of $50,000 on the Old Orchard site, or else commit itself to the $735,000 purchase. The mandamus action was in fact filed (No. 2313-72, District Court, District of Columbia). Plaintiff alleges that Talman agreed not to prosecute the suit in exchange for the Board's promise that the Talman application would eventually be granted. There is, however, no documentation whatsoever of this agreement â it is a pure assertion, and can function as no more than a specifically drafted paragraph in a complaint. There is documentation, however, that the Board announced its policy change before the January 15th date because of Talman's supposed real estate predicament, and also that Talman had, at another time, attempted to exert pressure on the Board through the threat of publicity and through litigation.

Very shortly after the alleged conversation between Whitlock and Sutton, Talman's application was returned unprocessed by the Chicago office of the Board, and Talman, through its vice president Albert Brody, telegraphed the Board, making reference to assurances of Allen that "favorable actions would be taken on Talman's application."

On April 4, 1973, oral argument on the Talman application was heard, at which counsel for sixteen protesting associations and banks were present. Plaintiff maintains that the decision to grant Talman the Old Orchard site was already determined in the agreement with Allen. However, no claim is raised here that if such an agreement ever existed, it manifested itself through a restriction of the information gathering process that took place at the oral argument or anywhere else.⁴ After the two new Board members took office, in June, 1973, they continued the factual inquiry regarding the Talman application, with the final Board decision emerging as a Board resolution on October 5, 1973.

Law Regarding Bias in Administrative Processes

Although plaintiff initially alleges both a violation of its due process rights under the Constitution and a violation of the fairness required by the Administrative Procedure Act, those two criteria, insofar as bias is concerned, appear to be the same.⁵Cf. Hoffmann-LaRoche, Inc. v. Kleindienst, 478 F.2d 1, 12 (3d Cir. 1973). Plaintiff has argued the existence of a "personal" bias, for whatever reason, which existed at the Board on several levels, which would have the effect of a tendency on the part of the Board to make decisions in favor of Talman regardless of the credible relevant information provided by any party with a contrary interest. See Davis, Administrative Law Treatise § 12.02 (1958). This type of bias must be distinguished from situations which frequently arise in connection with administrative bodies, in which a decision-maker makes a policy statement prior to a decision which would favor a particular outcome. Federal Trade Commission v. Cement Institute, 333 U.S. 683, 701-703, 68 S.Ct. 793, 92 L.Ed. 1010 (1948); accord, Skelly Oil Company v. Federal Power Commission, 375 F.2d 6, 17-18 (10th Cir. 1967), aff'd in part, rev'd in part, on other grounds, sub nom Permian Basin Area Rate Cases, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968). As Professor Davis has pointed out, "Bias in the sense of crystallized point of view about issues of law or policy is almost universally deemed no ground for disqualification" of a decision-maker. Davis, supra, § 12.01. Thus, the fact that members of the Board's staff may have favored a policy of generally allowing de novo branches can have no...