Kupiec v. Republic Federal Savings & Loan Ass'n

Citation512 F.2d 147
Decision Date04 March 1975
Docket NumberNo. 74-1835,74-1835
PartiesStephen P. KUPIEC and John E. Cihocki, Plaintiffs-Appellees, v. REPUBLIC FEDERAL SAVINGS AND LOAN ASSOCIATION and Otto C. Martinek, Defendants-Appellants.
CourtU.S. Court of Appeals — Seventh Circuit

Fredic G. Novy, James W. Ashley, Chicago, Ill. for defendants-appellants.

Mark Van Ausdal, Gerald J. Muller, Chicago, Ill, for plaintiffs-appellees.

Before FAIRCHILD, Chief Judge, and PELL and SPRECHER, Circuit Judges.

PELL, Circuit Judge.

The issue presented in this appeal is whether the Federal Home Loan Bank Board's Bylaw (g), 12 C.F.R. § 544.6(g), when adopted by a federal savings and loan association, is the sole and exclusive means of communication between members of the association, 1 and, if so, whether the bylaw is unreasonable or infringes on the constitutional rights of the members.

The plaintiffs, Stephen Kupiec and John Cihocki, are members of the defendant Republic Federal Savings and Loan Associations (Republic) by reason of being holders of savings accounts at Republic. 12 U.S.C. § 1464(b)(1). The defendant Republic is a federally chartered savings and loan association, organized and chartered under 12 U.S.C. § 1464 and having its office in Chicago, Illinois. The defendant Otto C. Martinek is president and chief executive officer of Republic.

The plaintiffs brought this action for injunctive and declaratory relief seeking access to the membership list of Republic. Jurisdiction was invoked under 28 U.S.C. § 1331 and § 1337.

In 1965 the Federal Home Loan Bank Board (the Board) promulgated Regulation 544.6(g), which set forth Bylaw (g) and authorized and preapproved the adoption of this permissive bylaw by federal savings and loan associations. Bylaw (g), the full text of which is set out as an appendix to this opinion, contains a procedure by which the members of an association can communicate with one another by mail concerning matters which may properly be considered at a meeting of the members. Prior to the filing of the instant action, the directors of Republic had adopted Bylaw (g).

The district judge denied the plaintiffs' motion for a preliminary injunction on the ground that the plaintiffs should first attempt to comply with Bylaw (g) before seeking access to the membership list. 2

Subsequently, the plaintiffs filed a second amended complaint. In this complaint, the plaintiffs alleged that as well as being members of Republic they are also both members of the Southwest Community Congress (SCC), a not-for-profit corporation composed of community organizations operating in the area in which Republic has its office. According to the second amended complaint, the plaintiffs, in conjunction with other SCC members who are also members of Republic, will nominate two persons for director at the next annual meeting of Republic in March 1975. The plaintiffs seek such representation on the Republic board "in order that Republic Federal In a hearing before the district judge, witnesses for the plaintiffs testified that not only would the procedure outlined in Bylaw (g) be too costly for SCC, but in addition, they could not effectively convey their message by using Bylaw (g). To be effective, according to these witnesses, they needed face-to-face conversations with Republic members as well as written communications.

become more responsive to its immediate geographical area, particularly in terms of making loans available within that community." The plaintiffs further alleged that they desire to solicit, through mailings and personal contact, the votes of other members of Republic. The plaintiffs, according to the complaint, investigated the possibility of utilizing the method of communication set forth in Bylaw (g) "but had to abandon said method because of excessive costs." 3

On the basis of the second amended complaint, certain affidavits, and the hearing, the district court granted the plaintiffs' motion for summary judgment and denied the defendants' motion to dismiss the second amended complaint. 4 The district court held that, under federal common law, the plaintiffs, as members of Republic, have a right to inspect and copy Republic's membership list and that Bylaw (g) did not preempt this common law right. The defendants appeal.

Preemption

The Home Owners' Loan Act of 1933, 12 U.S.C. § 1461 et seq., establishes the Federal Home Loan Bank Board and provides that the Board "is authorized, under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as 'Federal Savings and Loan Associations', and to issue charters therefor ...." 12 U.S.C. § 1464(a). Pursuant to this authority, the Board has promulgated comprehensive rules and regulations concerning the powers and operations of every federal savings and loan association "from its cradle to its corporate grave." Meyers v. Beverly Hills Federal Savings & Loan Ass'n, 499 F.2d 1145, 1147 (9th Cir. 1974). 5

Bylaw (g) essentially provides that a member may communicate with other members by furnishing the association with a copy of the communication. The association then mails the communication to its members, unless the communication is "made for an improper purpose." Prior to the promulgation of Bylaw (g), the federal laws and regulations were silent with respect to the right of a member of a federal savings and loan association to inspect and copy the association's membership list and failed to provide any means by which a member could communicate with other members.

The district court relying on Murphy v. Colonial Federal Savings and Loan Ass'n, 388 F.2d 609 (2d Cir. 1967); Durnin v. Allentown Federal Savings and Loan Ass'n, 218 F.Supp. 716 (E.D.Pa.1963), and Ochs v. Washington Heights Federal Savings and Loan Ass'n, 17 N.Y.2d 82, 268 N.Y.S.2d 294, 215 N.E.2d 485 (1966), held that, under federal common law, a number of a federal savings and loan association had a right to inspect or copy a membership list in order to solicit votes of other members for the election of directors. 6 The district court further held that Bylaw (g) did not supersede this federal common law right:

"The Court is unaware of any authority which states that the Federal Home A review of the wording, prior drafts, and Board interpretations of the bylaw convinces us that the district court erred in its conclusion.

Loan Bank Board's Regulation 544.6(g) preempts the federal common law. If the Federal Home Loan Bank Board had wished to suggest that its new form bylaw provided the exclusive rights to members wishing to communicate with other members, when these rights were quite different and far narrower than the right of a 'reasonable opportunity to ascertain the names and addresses of electors known to the management,' as described in Murphy, 388 F.2d at 612, it simply would have stated so." 384 F.Supp. at 1009.

After guaranteeing that "(e)very member shall have the right to communicate with other members in relation to any matter which may properly be considered at a meeting of members," the bylaw proceeds to describe in detail only one means of communication-a mailing by the association of submitted written material. No indication is given in the bylaw that in addition to this carefully detailed procedure, the members retain the right to inspect and copy the membership list.

Additional evidence that Bylaw (g), when adopted by an association, was meant to provide the exclusive means of communication between members is found by comparing the first and final drafts of the bylaw. The first draft provided that in lieu of the mailing by the association, the association could "furnish or make available to the member a current list of the names and addresses of all members of the association." 30 Fed.Reg. 8698 (1965). In the final draft of the bylaw however, this disclosure provision had been deleted.

Finally, on two separate occasions the Board has expressly stated that the bylaw was intended, when adopted, to supersede any common law right. When faced with a problem of statutory construction, great deference should be shown to the interpretation given the statute by the agency charged with its administration. "When the construction of an administrative regulation rather than a statute is in issue, deference is even more clearly in order." Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965).

In an opinion dated November 21, 1968, the Board stated:

"It was the purpose of the Board in authorizing this bylaw amendment to provide a fair, effective and orderly means of communication between members of a Federal savings and loan association. It was intended that such bylaw, if adopted by a Federal association, provide the sole authorized means by which a member of the association may communicate in writing with the membership. In particular, the bylaw is intended to provide for proxy solicitations by members, thus obviating any need which otherwise might exist for a membership list or for copying such information from the association's records. Further, the bylaw provision enables the solicitation of proxies to be carried out without the risk of harm to the association which might be caused by members who seek the identity of other members under the guise of proxy solicitation, but with the intention of utilizing the information thus obtained for improper purposes." (Emphasis added.)

Following the issuance of the district court's opinion and order in this cause, the Board issued a formal interpretative Ruling reaffirming its 1968 opinion. After quoting from its 1968 opinion, the Board stated:

"The Board hereby reaffirms its November 21, 1968, opinion. It has been and still is the Board's position that when a Federal savings and loan association has adopted the bylaw set forth in § 544.6(g), said bylaw provides the sole and exclusive means of...

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