Bankamerica Corporation v. United States
| Decision Date | 08 June 1983 |
| Docket Number | No. 81-1487,81-1487 |
| Parties | BANKAMERICA CORPORATION, et al., Petitioners v. UNITED STATES |
| Court | U.S. Supreme Court |
The fourth paragraph of § 8 of the Clayton Act provides that "[n]o person at the same time shall be a director in any two or more corporations, any one of which has capital, surplus, and undivided profits aggregating more than $1,000,000, engaged in whole or in part in commerce, other than banks, banking associations, trust companies, and common carriers," if such corporations are competitors. The United States brought test cases, consolidated in Federal District Court, against petitioners, certain banks, bank holding companies, mutual life insurance companies, and individuals who each served on the board of directors of one of the banks or bank holding companies and one of the insurance companies. It was stipulated that the interlocked banks and insurance companies compete in the interstate market for mortgage and real estate loans. The Government asserted that the interlocking directorates violated the fourth paragraph of § 8, arguing that the "other than banks" clause simply prevented overlapping regulation of interlocks between banks, which are separately regulated in the first three paragraphs of § 8. The District Court entered summary judgment for petitioners, holding that the statutory proscription applies only to two corporations, neither of which is a bank. The Court of Appeals reversed.
Held: The fourth paragraph of § 8 does not bar interlocking directorates between a bank and a competing insurance company. Pp. 126-140.
(a) The most natural reading of the language of the statute is that the interlocked corporations must all be corporations "other than banks" and that thus the fourth paragraph of § 8 does not by its express terms prohibit interlocking directorates between a bank and a competing nonbanking corporation. This reading of the statute is reinforced both by the structure of the Clayton Act and by the structure of the fourth paragraph of § 8. Pp. 128-130.
(b) Great weight is to be given to the contemporaneous interpretation of a challenged statute by an agency charged with its enforcement but for over 60 years prior to its present interpretation of § 8, the Government made no attempt to apply the statute to interlocks between banks and insurance companies, even though such interlocks were widespread and a matter of public record throughout the period. Mere failure of administrative agencies to act is in no sense a binding administrative interpretation that the Government lacks the authority to act, but in the circumstances of this case, the Government's failure for over 60 years to exercise the power it now claims strongly suggests that it did not read § 8 as granting such power. Moreover, the business community directly affected, the enforcing agencies, and the Congress all have read the statute the same way for 60 years, thus strongly supporting the conclusion that Congress intended § 8 to be interpreted according to its plain meaning. Pp. 130-133.
(c) If any doubt remains as to the meaning of the statute, that doubt is removed by the legislative history. The evolution of the bill, along with the remarks in committee and on the floor, rebuts the Government's claim that Congress intended to reach bank-nonbank interlocks in the fourth paragraph of § 8. Pp. 133-140.
656 F.2d 428 (9th Cir., 1981), reversed.
William Simon, Washington, D.C., argued, for petitioners.
Edwin S. Kneedler, Washington, D.C., argued, for respondent.
The question presented is whether Section 8 of the Clayton Act bars interlocking directorates between a bank and a competing insurance company.
In 1975, the United States brought these companion test cases (now consolidated) against ten corporations and five individuals. The corporations were three banks and their three respective holding companies, and four mutual life insurance companies. The five individuals each served on the board of directors of one of the banks or bank holding companies and one of the insurance companies. It was stipulated that the interlocked banks and insurance companies compete in the interstate market for mortgage and real estate loans.
The Government asserts that interlocking directorates between banks and insurance companies violate Section 8 of the Clayton Act, 15 U.S.C. § 19. The fourth paragraph of Section 8, on which the Government relies, provides:
"No person at the same time shall be a director in any two or more corporations, any one of which has capital, surplus, and undivided profits aggregating more than $1,000,000, engaged in whole or in part in commerce, other than banks, banking associations, trust companies, and common carriers subject to the Act to regulate commerce, approved February fourth, eighteen hundred and eighty-seven, if such corporations are or shall have been theretofore, by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the provisions of any of the antitrust laws." (Emphasis added).
In short, this statute forbids a person from serving simultaneously on the boards of directors of two or more corporations that meet certain specifications, namely, that the corporations be engaged in commerce, at least one of them having capital, surplus, and undivided profits worth more than $1,000,000, that they be competitors, and that they be "other than banks, banking associations, trust companies, and common carriers. . . ."
According to the Government, the language "[n]o person at the same time shall be a director in any two or more corporations . . . other than banks" prohibits interlocking directorates between any two or more competing corporations, but excludes from this general prohibition interlocking directorates between banks. The Government argues that the purpose of the "other than banks" clause was simply to prevent overlapping regulation of interlocks between banks, which are separately regulated in the first three paragraphs of Section 8. Thus, it interprets the fourth paragraph of Section 8 to reach interlocks between banks and nonbanks, which interlocks are otherwise unregulated. Petitioners respond that the "other than banks" clause expressly excludes interlocking directorates involving banks from the scope of the fourth paragraph of Section 8.
On cross-motions for summary judgment, the United States District Court for the Northern District of California granted summary judgment for petitioners and dismissed the Government's suits. 422 F.Supp. 686 (1976). The District Court held that
Although the District Court saw no need for further factual inquiry in light of the "clear statutory language," id., at 690, it observed that this interpretation of the statute was "confirmed by 60 years of administrative and Congressional inter- pretation, as well as by the legislative history underlying section 8." Id., at 703.
A divided Court of Appeals reversed. 656 F.2d 428 (CA9 1981). Unlike the District Court, the majority viewed the statutory language as ambiguous. It stated that the "other than banks" clause could be interpreted equally plausibly to mean either "two or more corporations none of which are banks," or "tw or more corporations not all of which are banks." Id., at 434. Relying chiefly on its view of the underlying policy of the Clayton Act, the Court of Appeals held that the fourth paragraph of Section 8 should be interpreted to bar all interlocking directorates between banks and competing nonbanking corporations.
In the view of the Court of Appeals, petitioners' position left a "gap" in the coverage of Section 8. Discerning nothing in the legislative history directly bearing on the applicability of Section 8 to interlocking directorates between banks and nonbanking corporations, the Court of Appeals relied on the broad purpose of Congress to condemn "interlocking directorates between large competing corporations," id., at 439, as support for an interpretation of Section 8 leaving no "loopholes." It thus interpreted the "other than banks" language to refer back to the interlocks between banks regulated in the preceding paragraphs of Section 8; this interpretation left interlocking directorates between banks and nonbanks subject to the general bar of the fourth paragraph of Section 8.1
We granted certiorari, --- U.S. ----, 102 S.Ct. 2294, 73 L.Ed.2d 1299 (1982), and we reverse.
The Clayton Act of 1914 was passed in a period when Congress was focusing on the perceived evils of corporate bigness and monopoly. President Wilson, for example, had made the "trusts" a core issue of his 1912 campaign; Congress followed up with the Pujo Committee investigation into the investment banking trust. See generally, Travers, Interlocks in Corporate Management and the Antitrust Laws, 46 Tex.L.Rev. 819, 824-829 (1968). Interlocks between large corporations were seen in the public debate as per se antagonistic to the public interest; many, including President Wilson, called for legislation that would, among other things, ban all kinds of interlocks. Interlocks were condemned regardless of whether the relationship between the corporations was horizontal or vertical; whether it was accomplished through the sharing of personnel, including directors and officers; or whether it was achieved through interlocking stock holdings or other...
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