Bank One Chicago v. Midwest Bank & Trust Co.

• Decision Date: 17 January 1996
• Docket Number: 941175
• Citation: 133 L.Ed.2d 635,116 S.Ct. 637,516 U.S. 264
• Parties: BANK ONE CHICAGO, N.A., Petitioner, v. MIDWEST BANK & TRUST COMPANY
• Court: U.S. Supreme Court

516 U.S. 264

116 S.Ct. 637

133 L.Ed.2d 635

BANK ONE CHICAGO, N.A., Petitioner,

v MIDWEST BANK & TRUST COMPANY.

No. 94-1175.

Supreme Court of the United States

Argued Nov. 28, 1995.

Decided Jan. 17, 1996.

Syllabus ^*

Petitioner Bank One sued respondent Midwest Bank, alleging that, in dishonoring a check Bank One had submitted for collection, Midwest failed to meet its obligations under a regulation prescribed by the Board of Governors of the Federal Reserve System (Board) pursuant to the Expedited Funds Availability Act (Act), 12 U.S.C. §§ 4001-4010. The District Court entered summary judgment for Bank One, but the Seventh Circuit vacated that judgment and ordered the action dismissed for lack of subject-matter jurisdiction. The appellate court focused on three of § 4010's civil liability provisions: § 4010(a) renders "any depository institution which fails to comply with any requirement imposed under this [Act or its implementing regulations] with respect to any person other than another depository institution . . . liable [in damages] to such person"; § 4010(f) empowers the Board to "impose on or allocate among [banks] the risks of loss and liability in connection with any aspect of the [check] payment system"; § 4010(d) provides for concurrent federal and state court jurisdiction over "[a]ny action under this section." These provisions, the court concluded, demonstrate that the Act authorizes original federal court jurisdiction only when a "person other than [a] depository institution" sues a "depository institution," § 4010(a), i.e., principally, when a depositor sues a bank. Interbank disputes, the court said, are to be "handled administratively" before the Board or perhaps in state court.

Held: The Act provides for federal court jurisdiction not only in suits between customers and banks, but also in cases initiated by one bank against another bank. Section 4010's language, reinforced by its title and drafting history, impel reading both subsection (a), which makes banks liable to "any person other than another depository institution," and subsection (f), which governs banks' liability inter se, as authorizing claims for relief enforceable in federal court as prescribed in subsection (d). Section 4010 is entitled "Civil liability"; its purpose is to afford private parties a claim for relief based on violations of the Act and its implementing regulations. Both subsections (a) and (f) impose civil liability for such violations. Though the two prescriptions are not parallel—most prominently, subsection (f) vests the Board with authority to establish the governing liability standards—they serve the same key purpose: both permit recovery of damages caused by a regulated party's failure to comply with the Act. Section 4010's drafting history suggests that interbank liability rules were to be developed administratively because Congress recognized that interbank disputes arising out of the check payment system may be more complex than those involving banks and depositors, not because Congress intended to create remedies that would be adjudicated in different forums. It is implausible that Congress directed the Board to handle such disputes administratively, for § 4010 does not explicitly confer adjudicatory authority on the Board, nor set forth the relevant procedures for resolution of private disputes. See, e.g., American Airlines, Inc. v. Wolens, 513 U.S. ----, 115 S.Ct. 817, 130 L.Ed.2d 715; Coit Independence Joint Venture v. FSLIC, 489 U.S. 561, 574, 109 S.Ct. 1361, 1369, 103 L.Ed.2d 602. The interpretation of § 4010 offered by Bank One and the United States is sensible because it allows all check-related claims arising out of the same transaction to be brought in a single federal or state court. The Seventh Circuit's reading, in contrast, would yield an incoherent jurisdictional scheme, whereby bank-depositor claims would be adjudicated in one such court, interbank claims under the Act would originate before the Board, and interbank claims under state law would presumably have to be raised in a separate state court proceeding. Pp. 641-643.

30 F.3d 64 (C.A. 7 1994), reversed and re manded.

GINSBURG, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and STEVENS, O'CONNOR, KENNEDY, SOUTER, THOMAS, and BREYER, JJ., joined, and in which SCALIA, J., joined in part. STEVENS, J., filed a concurring opinion, in which BREYER, J., joined. SCALIA, J., filed an opinion concurring in part and concurring in the judgment.

Robert A. Long, Jr., Washington, DC, for petitioner.

Jeffrey P. Minear, Washington, DC, for United States as amicus curiae, by special leave of the Court.

Robert G. Epsteen, Chicago, IL, for respondent.

Justice GINSBURG delivered the opinion of the Court.

This case concerns the Expedited Funds Availability Act, 12 U.S.C. §§ 4001-4010, a 1987 law designed to accelerate the availability of funds to bank depositors and to improve the Nation's check payment system. We confront a jurisdictional question regarding the Act's civil liability provisions, in particular §§ 4010(a), (d), and (f): Is federal court subject-matter jurisdiction under those provisions confined to suits initiated by bank customers against banks, as the Court of Appeals held, or do federal courts have jurisdiction, as well, over suits brought by one bank against another depository institution? We hold that the Act provides for federal court jurisdiction not only in suits between customers and banks, but also in cases initiated by one bank against another bank.

I

Historically, the Nation's check payment system has been controlled primarily by state law, particularly, in recent decades, by articles 3 and 4 of the Uniform Commercial Code (UCC). Although federal regulations have long supplemented state law in this area, see most notably Regulation J, 12 CFR pt. 210 (1995), the UCC has supplied the basic legal framework for bank deposits and check collections. But despite UCC controls, the check-clearing process too often lagged, taking days or even weeks to complete. To protect themselves against the risk that a deposited check would be returned unpaid, banks typically placed lengthy "holds" on deposited funds. Bank customers, encountering long holds, complained that delayed access to deposited funds impeded the expeditious use of their checking accounts. See S.Rep.No. 100-19, 100th Cong. 1st Sess. 25-26 (1987) U.S.Code Cong. & Admin. News 1987 at pp. 489, 515-516.

In 1987, Congress responded by passing the Expedited Funds Availability Act (EFA Act or Act), 101 Stat. 635, as amended, 12 U.S.C. §§ 4001-4010. The Act requires banks ¹ to make deposited funds available for withdrawal within specified time periods, subject to stated exceptions. See §§ 4002, 4003. To reduce banks' risk of nonpayment, the Act grants the Board of Governors of the Federal Reserve System (Federal Reserve Board or Board) broad authority to prescribe regulations expediting the collection and return of checks. § 4008. The Board and other banking agencies are authorized to enforce the Act's provisions administratively, by issuing cease-and-desist orders and imposing other civil sanctions. See § 4009(a) (incorporating administrative enforcement provisions of 12 U.S.C. § 1818).

The Act's final section contains civil liability provisions, which are the focus of this case. See § 4010. Subsection 4010(a) addresses a bank's liability to persons other than another depository institution. It provides, in pertinent part:

"Except as otherwise provided in this section, any depository institution which fails to comply with any requirement imposed under this chapter or any regulation prescribed under this chapter with respect to any person other than another depository institution is liable to such person in an amount equal to the sum of [a specified measure of damages]."

Subsection 4010(f) governs a bank's liability to another bank for violation of the Act's provisions. It states:

"The Board is authorized to impose on or allocate among depository institutions the risks of loss and liability in connection with any aspect of the [check] payment system. . . . Liability under this subsection shall not exceed the amount of the check giving rise to the loss or liability, and, where there is bad faith, other damages, if any, suffered as a proximate consequence of any act or omission giving rise to the loss or liability."

Subsection 4010(d) provides for concurrent federal and state court jurisdiction over civil liability suits:

"Any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year after the date of the occurrence of the violation involved."

The Federal Reserve Board has implemented the EFA Act through Regulation CC, 12 CFR pt. 229 (1995). Subpart C of Regulation CC contains rules to expedite the collection and return of checks. It requires banks, among other things, to return checks "in an expeditious manner," § 229.30(a); provide prompt notice of nonpayment of certain checks, § 229.33(a); and include in the notice the reason for nonpayment, § 229.33(b)(8). Section 229.38 states standards governing interbank liability. It instructs banks to "exercise ordinary care and act in good faith in complying with the requirements of [Subpart C]," and further prescribes (in relevant part): "A bank that fails to exercise ordinary care or act in good faith . . . may be liable to" other depository institutions. § 229.38(a). Section 229.38 repeats the jurisdictional provision Congress placed in 12 U.S.C. § 4010(d), i.e., the regulation provides for concurrent state and federal court jurisdiction over "[a]ny action under this subpart." 12 CFR § 229.38(g) (1995).

II

This controversy stems from an interbank dispute regarding a dishonored check. Petitioner Bank One sued respondent Midwest Bank in Federal District Court, alleging that Midwest had failed to comply with its...