First Nat. Bank in Sioux Falls v. National Bank of South Dakota

• Decision Date: 29 December 1981
• Docket Number: No. 81-1803,81-1803
• Citation: 667 F.2d 708
• Parties: The FIRST NATIONAL BANK IN SIOUX FALLS, a national banking corporation, Appellant, v. NATIONAL BANK OF SOUTH DAKOTA and all its Branches using the name of First Bank of South Dakota (N.A.)-Sioux Falls, a national banking corporation and John Heimann, Comptroller of the Currency, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 708

667 F.2d 708

The FIRST NATIONAL BANK IN SIOUX FALLS, a national banking

corporation, Appellant, v. NATIONAL BANK OF SOUTH DAKOTA and all its Branches using the

name of First Bank of South Dakota (N.A.)-Sioux Falls, a

national banking corporation and John Heimann, Comptroller

of the Currency, Appellees.

No. 81-1803.

United States Court of Appeals,

Eighth Circuit.

Submitted Oct. 15, 1981.

Decided Dec. 29, 1981.

Michael F. Pieplow (argued), Davenport, Evans, Hurwitz & Smith, Sioux Falls, S. D., for appellant.

Dorsey, Windhorst, Hannaford, Whitney & Halladay, David A. Ranheim (argued), Daniel P. O'Keefe, Minneapolis, Minn., for appellee National Bank of South Dakota.

Jeffrey L. Viken, Acting U. S. Atty., J. Paul McGrath, Acting Asst. Atty. Gen. U. S. Dept. of Justice, Ronald R. Glancz, James F. E. Gillespie, Jr. (argued), Attys., Litigation Div., Washington, D. C., for appellee Heimann.

Before LAY, Chief Judge, McMILLIAN, Circuit Judge, and HUNTER, ^* Senior District Judge.

ELMO B. HUNTER, Senior District Judge.

The First National Bank in Sioux Falls BSiouxFallsappealsfrom the summary judgment entered by the district court ¹, 517 F.Supp. 1296, affirming the Comptroller of the Currency's approval of a name change for National Bank of South Dakota (National Bank) to First Bank of South Dakota (N.A.). The district court ordered a stay of the change pending this appeal. We affirm the decision of the district court.

On appeal from the district court, the appellate court "must render an independent decision on the basis of the same administrative record as that before the district court; the identical standard of review is employed at both levels; and once appealed, the district court decision is accorded no particular deference." First National Bank of Fayetteville v. Smith, 508 F.2d 1371, 1374 (8th Cir. 1974), cert. den. 421 U.S. 930, 95 S.Ct. 1655, 44 L.Ed.2d 86 (1975). The appropriate record on review is not that made by the district court, but the administrative record already in existence. Id.; Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973). Therefore, we look solely to the administrative record.

Procedural History

Appellee National Bank applied to the United States Comptroller of the Currency (Comptroller) for permission to change its name pursuant to 12 U.S.C. § 30. National Bank has eighteen branches in South Dakota, including branches in Sioux Falls and Rapid City.

In response to the published notice of the application, two competing banks objected to the name change, The First National Bank in Sioux Falls BSiouxFalls,appellant, and First National Bank of the Black Hills ² located in Rapid City. A public hearing on the proposed change was scheduled before the Regional Director for Corporate Activities, Ninth National Bank Region. ³

At the hearing, both the applicant and the two protestants presented witnesses. National Bank's witnesses explained the business justification for the proposed change and stated that they believed there would be no substantial confusion resulting from the name change. Protestants' witnesses relied on the results of similar name changes and concluded that substantial confusion would result.

Post-hearing statements were submitted by all parties. Following this submission, the Regional Administrator and the Regional Director for Corporate Activities reviewed the entire record and provided analysis and recommendations. These, together with the record, were forwarded to the Division for Bank Organization and Structure in Washington, D. C. Its director, the Manager of Bank Structure Analysis, and a staff analyst reviewed the record and added their own recommendations and comments. The Comptroller's staff unanimously recommended that the application be approved. On this augmented record, the Deputy Comptroller of the Currency approved the application for name change and later issued a Supplemental Opinion outlining the reasons for his approval. The district court affirmed the Comptroller's approval.

Standard of Review

In reviewing the district court's decision affirming the Comptroller's action, there are three standards of review which must be considered. The first is the one used in reviewing an agency's decision on fact questions. We addressed this standard in First National Bank of Fayetteville v. Smith, 508 F.2d 1371, 1379 (8th Cir. 1974). ⁴ We relied on the standard of review set out in the Administrative Procedure Act, 5 U.S.C. § 706 (1976):

... To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall-

(2) hold unlawful and set aside agency action, findings, and conclusions found to be-

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.

The scope of the "arbitrary and capricious" standard of review is more restrictive than the "substantial evidence" test, ⁵ and

"(a)dministrative action may be regarded as arbitrary and capricious only where it is not supportable on any rational basis." ... Something more than mere error is necessary to meet the test .... To have administrative action set aside as arbitrary and capricious, the party challenging the action must prove that it was "willful and unreasoning action, without consideration and in disregard of the facts or circumstances of the case."

508 F.2d at 1376. (Citations omitted.)

In determining whether the Comptroller's action is arbitrary and capricious, the court is required to look at all of the evidence before the Comptroller, and not just the evidence that supports the agency decision. Universal Camera Corp. v. NLRB, 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951).

The second standard of review is that used for questions of law, e.g., interpretation of the statutes or the Constitution. The reviewing court is not limited to the arbitrary and capricious standard and it can determine such questions de novo. Dakota National Bank & Trust Co. v. First National Bank, 554 F.2d 345, 350-51 (8th Cir. 1977), cert. den. 434 U.S. 877, 98 S.Ct. 229, 54 L.Ed.2d 157 (1977). However, when it is a question of the interpretation of an agency's own regulation, a third standard is used. In such event, the agency interpretation is entitled to deference by the court and is "of controlling weight unless it is plainly erroneous or inconsistent with the regulation." United States v. Larionoff, 431 U.S. 864, 873, 97 S.Ct. 2150, 53 L.Ed.2d 48 (1977); Cohen v. Civil Aeronautics, 657 F.2d 999 (8th Cir. 1981). In addition, the regulation must be consistent with the statute under which it is promulgated. United States v. Larionoff, supra.

The Statute and Regulation

Title 12, section 30, United States Code, states "(a)ny national banking association, with the approval of the Comptroller of the Currency, may change its name ...." In requiring the "approval" of the Comptroller, "Congress intended to confer discretionary authority on the Comptroller," and the Comptroller has implied authority to state publicly, e.g., by rule-making, the manner in which he will exercise that discretion. North Dakota v. Merchant's National Bank & Trust Co., 634 F.2d 368, 380-81 (8th Cir. 1981).

Pursuant to this authority, the Comptroller has promulgated his policy statement on change of corporate title as follows:

The office considers an application for change of corporate title to be primarily a business decision of the applicant. An application generally will be approved if the proposed new title is sufficiently dissimilar from that of any other existing or proposed unaffiliated bank or depository financial institution so as not to substantially confuse or mislead the public in a relevant market.

12 C.F.R. § 5.42(b) (1981).

The Record

The record shows that the reason for the business decision to change the name of the bank was to more closely identify the bank with its parent bank and the other ninety member banks of the First Bank System. ⁶ National Bank especially desired to be more closely tied with the six other First Bank System affiliates in South Dakota, and the six in southwestern Minnesota, all of which share a common media coverage. The bank officials believed that the use of a common prefix (First Bank) would permit a more efficient marketing of services and would aid customers moving into the area and tourists in identifying this bank with the other banks in the system.

The Comptroller found that this was a "legitimate business purpose and (would) benefit the bank, holding company and bank customers." Although FNB Sioux Falls argues that the name change is unnecessary in that National Bank was already sufficiently identified with its holding company, we do not find the Comptroller's finding to be arbitrary and capricious.

The more vital dispute is with the Comptroller's finding that the name change will not substantially confuse or mislead the public in the relevant market. Both applicant and protestants presented evidence at the hearing on this issue.

Applicant National Bank presented seven witnesses, including prominent bank officials from various banks. These bank officials outlined the extensive educational and advertisement program they had planned to inform the public of the name change. Officials from other banks testified as to their experiences with similar name changes. These witnesses included a bank official from First Bank of North Dakota-Grand Forks and one from First Bank of North Dakota-Fargo. In both of these cities there had been an existing First National Bank and then a competing bank changed its name to First Bank. Another official was from First National Bank in Miles City, Montana, where the other three banks in town also begin with "first." In Miles City, the First National Bank was the original "First" and the others had come...