ASS'N OF DATA PROCESSING, ETC. v. Federal Home Loan Bank of Cincinnati

Decision Date27 September 1976
Docket NumberCiv. No. 8999.
Citation421 F. Supp. 384
PartiesASSOCIATION OF DATA PROCESSING SERVICE ORGANIZATIONS, INC. and United Data Processing, Inc., Mid Continent (Amicus Curiae), Plaintiffs, v. FEDERAL HOME LOAN BANK OF CINCINNATI et al., Defendants.
CourtU.S. District Court — Southern District of Ohio

COPYRIGHT MATERIAL OMITTED

Gerald W. Simmons, Cincinnati, Ohio, Herbert E. Marks, Washington, D. C., Robt. Showalter, Denver, Colo., for plaintiffs.

Murray S. Monroe, Cincinnati, Ohio, Daniel J. Goldberg, Juan A. del Real, Washington, D. C., for defendants.

FINDINGS OF FACT, OPINION, AND CONCLUSIONS OF LAW

CARL B. RUBIN, District Judge.

This matter is before the Court for final disposition based upon dispositive motions of the parties together with the appropriate memoranda for and against such motions.1

Plaintiffs question the authority of defendants to provide data processing service to those building and loan associations which are members of the Federal Home Loan Bank system. Pursuant to Rule 52 of the Federal Rules of Civil Procedure, the Court does submit herewith its findings of fact and conclusions of law.

I FINDINGS OF FACT

1. Plaintiff, Association of Data Processing Service Organizations, Inc. is a New York nonprofit corporation. It is a national trade association for independent data processing companies. So far as it is pertinent in this matter, such companies have the capability of providing data processing by computer equivalent to that provided by the Federal Home Loan Banks.

2. Plaintiff, United Data Processing, Inc. is an Ohio corporation which provides data processing services to the general public, including savings and loan associations and other savings institutions.

3. The defendant Federal Home Loan Bank of Cincinnati is one of twelve federal home loan banks established pursuant to the Federal Home Loan Bank Act, 12 U.S.C. § 1421 et seq. Section 1423 of such Act provides for the establishment in each district of a federal home loan bank at a city so designated. By virtue of its creation, such defendant is a federal instrumentality.

4. The defendant Federal Home Loan Bank Board is a federal agency created by the Federal Home Loan Bank Act. Such Board is referred to specifically in 12 U.S.C. § 1437 and pursuant thereto it exercises supervisory authority over defendant Federal Home Loan Bank of Cincinnati and the other federal home loan banks.

Individual defendants Thomas R. Boman and Grady Perry, Jr. are individual members of the Federal Home Loan Bank Board. Pursuant to 12 U.S.C. § 1437, they were appointed to such Board by the President of the United States. Unless otherwise specifically stated, their connection with this litigation will be deemed to be as members of the Board and not as individuals.

5. Intervening defendants Federal Home Loan Banks of New York, Chicago, Pittsburgh and Des Moines are four of the other eleven federal home loan banks similar in organization to the Federal Home Loan Bank of Cincinnati. They were created in accordance with 12 U.S.C. § 1423. Intervention in this matter was permitted by order of this Court on April 15, 1974.

6. In January of 1970 the Federal Home Loan Bank of New York began offering data processing services to its member savings and loan associations.2 Authority for such services was contained in Board Resolution 22183, dated October 13, 1968.

On October 19, 1970, the Federal Home Loan Bank Board issued Resolution 70-327 permitting Federal Home Loan Banks to provide on-line savings, mortgage and general ledger data processing services.3 Resolution 70-327 contained the following: "such services shall be provided only if acceptable comparable services are not otherwise conveniently available to member institutions."
On January 23, 1972, Resolution 70-327 was rescinded and in its place Resolution 72-186 was adopted February 10, 1972. Such replacement resolution did not limit the offering of services where acceptable comparable services were not conveniently available but did express a desire "to assure that the provision of such services will not be unduly injurious to other private entities providing such services."
Approval of a request to provide on-line service by defendant Federal Home Loan Bank of Cincinnati was given in October of 1970.

7. On-line services relate to the day-to-day business operations of the member savings and loan institutions. Equivalent services can be provided by commercial data processors, such as plaintiff UDP. These services are commercial business activities, and are provided to the member savings and loan institutions in direct competition with plaintiff members including plaintiff United Data Processing, Inc.

8. Beginning in May, 1971, plaintiff expressed concern over the data processing activities of defendant. Plaintiffs were advised of Resolution 70-327 and took no further action. Upon learning of the rescission of Resolution 70-327 in February, 1972, plaintiffs made frequent protests against the competition. Defendant Federal Home Loan Bank Board was aware of such protests and chose to ignore them. This action was commenced in October, 1973. The data processing activities of defendant continue to this time.

II
OPINION
A. Nature of Judicial Inquiry

We deal with an inquiry into statutory authorization of conduct. Is defendants' action, in providing commercial data processing services to its member savings and loan institutions, authorized by the Federal Home Loan Bank Act? Where the authorization is clear, a challenge to the choice of an exercising authority based upon interpretation of the facts would require a "rational basis" test, i. e., if such authority's choice were supported on a rational basis a court could not substitute its own judgment.

We do not review herein an agency choice based upon facts within its particular area of expertise. We must instead examine an enabling statute for an expression of authority. Such examination involves a "substitution of judicial judgment" standard.4

We base this conclusion upon Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970):

Since the only or principal dispute relates to the meaning of the statutory term, the controversy must ultimately be resolved, not on the basis of matters within the special competence of the Secretary, but by judicial application of canons of statutory construction. See Texas Gas Transmission Corp. v. Shell Oil Co., 363 U.S. 263, 268-270, 80 S.Ct. 1122, 4 L.Ed.2d 1208, "The role of the courts should, in particular, be viewed hospitably where . . . the question sought to be reviewed does not significantly engage the agency's expertise. `Where the only principal dispute relates to the meaning of the statutory term' . . . the controversy presents issues on which courts, and not administrators, are relatively more expert." Hardin v. Kentucky Utilities Co., 390 U.S. 1, 14, 88 S.Ct. 651, 19 L.Ed.2d 787 (Harlan, J. dissenting.)
Barlow v. Collins, supra at 166, 90 S.Ct. at 837.

Barlow is but one decision on this subject. It rests upon substantial precedent. Other pronouncements by the Supreme Court make the role of the judiciary quite clear:

The deference owed to an expert tribunal cannot be allowed to slip into a judicial inertia which results in the unauthorized assumption by an agency of major policy decisions properly made by Congress. (emphasis added.)
American Ship Bldg. Co. v. NLRB, 380 U.S. 300, 318, 85 S.Ct. 955, 967, 13 L.Ed.2d 855 (1965).
Undoubtedly questions of statutory interpretation, especially when arising in the first instance in judicial proceedings, are for the courts to resolve, giving appropriate weight to the judgment of those whose special duty is to administer the questioned statute. . . . But where the question is one of specific application of a broad statutory term in a proceeding in which the agency administering the statute must determine it initially, the reviewing court's function is limited. (emphasis added.)
NLRB v. Hearst Publications, Inc., 322 U.S. 111, 130-131, 64 S.Ct. 851, 860, 88 L.Ed. 1170 (1944).

There is even an indication that for a court not to review the agency's construction would be an abdication of the court's responsibility:

While this Court has announced that it will accord great weight to a departmental construction of its own enabling legislation, especially in a contemporaneous construction, . . . it is only one input in the interpretational equation.
. . .
The Court may not, however, abdicate its ultimate responsibility to construe the language employed by Congress.
Zuber v. Allen, 396 U.S. 168, 90 S.Ct. 314, 24 L.Ed.2d 345 (1969).
B. Standing

In 1969 the Supreme Court of the United States addressed the question of standing in the case of Association of Data Processing Service Organizations, Inc. v. Camp, Comptroller of the Currency, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970). The plaintiff in that case is the plaintiff herein. It challenged a ruling by the Comptroller of the Currency which permitted national banks as an incident to their banking service to make data processing services available to other banks and bank customers. The Supreme Court held that the petitioner had standing to maintain the action. Petitioner satisfied the case or controversy test of Article III of the Constitution and demonstrated that the interest sought to be protected was arguably within the zone of interests to be protected or regulated by the statutes. Plaintiff was held to be an aggrieved person under Section 702 of the Administrative Procedure Act.

It is difficult to draw a distinction between standing of this plaintiff in a controversy with the Comptroller of the Currency and its standing in the identical issue in a controversy with the Federal Home Loan Bank Board.5

C. Laches

The defendants and intervenors have moved for summary judgment asserting the affirmative defense of laches. To prevail on the equitable defense of laches a defendant must prove all...

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