Association of Data Processing Service Organizations, Inc. v. Federal Home Loan Bank Bd.

Decision Date05 December 1977
Docket NumberNos. 76-2507,76-2508,s. 76-2507
PartiesASSOCIATION OF DATA PROCESSING SERVICE ORGANIZATIONS, INC., and United Data Processing, Inc., Plaintiffs-Appellees, v. FEDERAL HOME LOAN BANK BOARD et al., Defendants-Appellants.
CourtU.S. Court of Appeals — Sixth Circuit

Gerald W. Simmons, Paxton & Seasongood, Cincinnati, Ohio, Pierre J. LaForce, Washington, D. C., for plaintiffs-appellees.

Charles L. Cornelius, Jr., Cornelius, Collins, Higgins & White, Nashville, Tenn., for amicus curiae Tenn. Sav.

Gross C. Lindsay, Trimble, Cubbage, Lindsay & Thomason, Henderson, Ky., for amicus curiae Ky. Sav.

John V. Simshauser, Berry, Leighty & Simshauser, Macomb, Ill., for amicus curiae Sav. & Loan Ass'n.

Murray S. Monroe, Taft, Stettinius & Hollister, Cincinnati, Ohio, for Home Loan Bank of Cincinnati.

John R. Phillips, Cincinnati, Ohio, Juan A. del Real, Hill, Christopher & Phillips, P. C., George L. Christopher, Charles Lee Eisen, Washington, D. C., for intervenor-defendants.

Before WEICK, CELEBREZZE and ENGEL, Circuit Judges.

ENGEL, Circuit Judge.

The principal issue in this appeal is whether a federal home loan bank, with the approval of the Federal Home Loan Bank Board, may sell on-line data processing services to savings and loan associations This suit was originally brought in 1973 by the Association of Data Processing Service Organizations, Inc. (ADAPSO) and by United Data Processing, Inc. (UDP) against the Federal Home Loan Bank of Cincinnati, the Federal Home Loan Bank Board and two individual members of that Board. The action sought declaratory and injunctive relief preventing the Cincinnati bank from providing on-line data processing services to member institutions and halting any further authorization of such services to other federal home loan banks by the Board and Board members.

and other member institutions under the Federal Home Loan Bank Act of 1932, 12 U.S.C. §§ 1421-1449 (1970).

On April 15, 1974, the Federal Home Loan Banks of Des Moines, Chicago, Pittsburgh, and New York were allowed to intervene and to answer as defendants in these proceedings. Extensive data were submitted by all parties and the issues were framed by cross motions for summary judgment. The appeals herein are from the summary judgment entered by the district court in favor of the plaintiffs. The summary judgment so entered provided in part:

The providing of data processing services to member institutions is not an express power granted to Federal Home Loan Banks or the Board by the Federal Home Loan Bank Act. . . .

The authorization issued by defendant Federal Home Loan Bank Board to defendant and intervenor Federal Home Loan Banks of Cincinnati, New York, Chicago, Des Moines, and Pittsburgh purporting to approve the data processing services of the defendant and intervenor Federal Home Loan Banks complained of in this action is illegal and void by reason of being in excess of statutory authority. . . .

The Court permanently enjoins defendant and intervenor Federal Home Loan Banks of Cincinnati, New York, Chicago, Pittsburgh and Des Moines from engaging in the said data processing services for thrift institutions within their jurisdiction.

The Court permanently enjoins defendants Thomas R. Boman and Grady Perry, Jr. from authorizing the sale of commercial data processing services by Federal Home Loan Banks.

We affirm the judgment of the district court.

Plaintiff ADAPSO is a national trade association of data processing companies, some of which offer data processing services to member institutions of the federal home loan bank system. UDP is a member of ADAPSO which furnishes data processing services to certain institutions in Ohio, Kentucky, Indiana, and Tennessee.

The Federal Home Loan Bank Board is an independent federal agency charged by the Federal Home Loan Bank Act with general administrative and supervisory responsibilities for the federal home loan bank system. The Board is also responsible for chartering, organizing, and supervising federal savings and loan associations under § 5(a) of the Home Owners' Loan Act of 1933, 12 U.S.C. § 1464(a) (1970). Its members are appointed by the President with the consent of the Senate.

The federal home loan bank system today consists of twelve home loan banks and more than 4,300 "thrift" institutions which are members. These member thrift institutions consist primarily of federally- and state-chartered savings and loan associations, although certain building and loan associations, cooperative banks, homestead associations, insurance companies, and savings banks are also eligible for membership. 12 U.S.C. § 1424 (1970). To become and remain a member, an institution must subscribe to stock of the home loan bank in its district. While a large block of that stock had originally been purchased by the federal government due to inadequate capitalization during the Great Depression, at present the capital stock of each home loan bank is owned entirely by its members. Nevertheless federal home loan banks remain "federal instrumentalities," Fahey v. O'Melveny & Meyers, 200 F.2d 420, 446 (9th Cir. 1952), and enjoy certain tax immunities. 12 U.S.C. § 1433 (1970). The Board In October, 1968, the Board began to authorize certain home loan banks to provide on-line data processing services to member institutions. On October 19, 1970, the Board adopted a general Resolution No. 70-327 which stated that "it may be necessary or desirable for federal home loan banks to provide on-line savings, mortgage, and general ledger services to member institutions." Under that resolution, however, such services were to be provided "only if acceptable comparable services are not otherwise conveniently available to member institutions." On January 27, 1972, the Board authorized the defendant Home Loan Bank of Cincinnati to provide on-line services to its member institutions. On the same day it rescinded Resolution No. 70-327, replaced two weeks later by the Board's Resolution No. 72-186. That new resolution deleted the earlier limitation that such services should be supplied only where comparable services were unavailable and instead simply stated that "to assure that the provision of such services will not be unduly injurious to other private entities providing similar services, the Board will closely monitor and control the data processing activities of the District Banks." The resolution, however, put no other restraint or limitation upon providing such services.

also operates and directs the Federal Savings and Loan Insurance Corporation, an independent federal agency insuring savings accounts of all federal savings and loan associations and of certain state savings and loan associations.

Pursuant to the above and similar resolutions, the Cincinnati bank and the intervening home loan banks have proceeded in varying degrees to furnish data processing services to member institutions.

Computerized data processing services enable member institutions to instantaneously record changes in savings accounts and mortgage loan accounts and to analyze large quantities of information. The services currently performed relate primarily to internal record keeping of the member institutions. Thrift institutions do not in turn offer their corporate clients access to the computer system nor do they make excess computer time available to other groups. 1 Traditionally the daily work of savings deposit and mortgage loan accounting in savings and loan associations was performed either by pen and ink calculations or by mechanical devices. On-line data processing utilizes computer terminals at the institution's teller windows which are connected in turn by telephone lines to a main computer located on the premises of a data processing service center. As each depositor's transaction is processed in the institution's teller terminal, that data is transmitted electronically to a main computer where the particular customer's account information is stored in the computer memory bank. The computer updates the account information and then instantaneously transmits the data back to the teller's window terminal, the entire process normally taking only one or two seconds. In somewhat like manner, the computer services handle all the accounting details with respect to payments on loans made by the particular institution. 2

The home loan banks provide essentially the same types of data retrieval and analysis, though specific services may vary from bank to bank. For instance a home loan bank might offer the following reports with respect to savings deposit accounts: daily reports, listing in numerical sequence all transactions that occurred on a given day in every savings account of the member institution;

summary totals of all savings transactions by type and branch, including statistics regarding new and closed accounts which are transmitted to the member each evening via its computer terminal; a recap of savings balances, also transmitted nightly by type of account; monthly reports listing in account number sequence detailed information concerning each of the member institution's savings deposit accounts; monthly reports of anticipated dividends by type of account and branch; a monthly report analyzing the monetary range of account balances; detailed reports concerning the accounts opened and closed during the preceding month. In addition dividend checks themselves are printed by computer and a journal list of all such checks is provided to the member. The bank also furnishes member institutions with IRS forms 1099 to be delivered to institution depositors and borrowers showing the amounts of dividends and interest paid to them during the preceding year. 3

LEGAL INTEREST AND STANDING

While any challenge to the plaintiffs' standing to bring this action appears...

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