Baggett v. First Nat. Bank of Gainesville

• Decision Date: 28 July 1997
• Docket Number: No. 96-8019,96-8019
• Citation: 117 F.3d 1342
• Parties: 11 Fla. L. Weekly Fed. C 243 Rebecca Otwell BAGGETT, Teressa Latrelle Otwell, Frances Otwell Bagby, Plaintiffs-Appellants, v. FIRST NATIONAL BANK OF GAINESVILLE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1342

117 F.3d 1342

11 Fla. L. Weekly Fed. C 243

Rebecca Otwell BAGGETT, Teressa Latrelle Otwell, Frances Otwell Bagby, Plaintiffs-Appellants, v. FIRST NATIONAL BANK OF GAINESVILLE, Defendant-Appellee.

No. 96-8019.

United States Court of Appeals Eleventh Circuit.

July 28, 1997.

Harmon W. Caldwell, Jr., Wade H. Watson, III, Randall S. Berryman, Caldwell & Watson, Atlanta, GA, for plaintiffs-appellants.

Jon D. Stewart, Stewart Melvin & Frost, Gainesville, GA, for defendant-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before HATCHETT, Chief Judge, TJOFLAT, Circuit Judge, and CLARK, Senior Circuit Judge.

CLARK, Senior Circuit Judge:

We have reviewed plaintiffs/appellants' complaint filed in district court, appellants' brief, the applicable statutes, and the Congressional History of the Bank Holding Company Act and we agree with the district court's holding that the Act does not grant federal court jurisdiction of a lawsuit brought by the heirs of a decedent challenging a bank's actions as Trustee and Executor of the decedent's estate.

Since the opinion of the district court amply describes the issues and controlling law, we hereby adopt the district court's opinion of November 28, 1995, attached hereto as Exhibit A.

AFFIRMED.

Exhibit A

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN

DISTRICT OF GEORGIA, ATLANTA DIVISION.

Rebecca Otwell Baggett, Teressa Latrelle Otwell, and Frances

Otwell Bagby, Plaintiffs,

v.

First National Bank of Gainesville, Defendant.

CIVIL ACTION NO. 1:95-CV-684-FMH.

ORDER

This case is before the Court on the Defendant First National Bank of Gainesville's Motion to Dismiss for want of subject matter jurisdiction [3-1]. After reviewing the record and hearing oral argument from counsel for the parties, the Court grants Defendant's Motion to Dismiss.

I. FACTS

Plaintiffs Rebecca Otwell Baggett, Teressa Latrelle Otwell, and Frances Otwell Bagby ("Plaintiffs") are beneficiaries of the Estate of Roy P. Otwell, Sr. and contingent beneficiaries under certain testamentary trusts created under the Last Will and Testament of Roy P. Otwell, Sr. The Defendant First National Bank of Gainesville ("Defendant") serves as (a) Executor of the Last Will and Testament of Roy P. Otwell and Trustee of the testamentary trust under that Will; (b) Trustee of a trust created by the Will and a consent order entered in a state court action consented to by all parties herein; and (c) as Trustee of an Inter Vivos Trust created by Roy P. Otwell in 1984 for the benefit of Roy P. Otwell, Jr., an incompetent son of Roy P. Otwell, Sr. Plaintiffs are contingent beneficiaries of the 1984 Inter Vivos Trust and beneficiaries of the testamentary trust under the Last Will and Testament.

Plaintiffs contend, inter alia, that Defendant breached its fiduciary duties as trustee and committed acts of mismanagement, neglect and self-dealing, by specifically (a) failing to fund properly a testamentary trust for Roy Otwell, Jr.; (b) by overvaluing the real estate assets in the estate thereby causing the estate to pay unnecessary taxes and administration fees; (c) engaging in self-dealing by making a loan to the estate at an excessive rate of interest; (d) spending excessive amounts of money remodeling a house for Roy Otwell, Jr.; (e) transferring an easement to the City of Cumming for little or no consideration over Plaintiffs' objections; and (f) charging attorneys' fees to the estate that should have been paid by Defendant. According to Plaintiffs, this alleged pattern of misconduct resulted in a pecuniary gain to Defendant.

Plaintiffs assert that their Complaint presents a federal question under the Bank Holding Company Act ("BHCA" or "Act"), 12 U.S.C. § 1972(2)(F) & 12 U.S.C. § 1975 (1994). Specifically, Plaintiffs contend that Defendant's alleged misconduct violated the provisions of § 1972(2)(F)(ii), that Plaintiffs lost money as a result, and that Plaintiffs may thus sue under § 1975 for injury in their "property by reason of [conduct] forbidden in section 1972." 12 U.S.C. § 1975 (1994). As outlined below, this Court finds that Plaintiffs' Complaint fails to state a cause of action under the BHCA, and thus Plaintiffs' Complaint is dismissed for lack of subject matter jurisdiction.

II. BANK HOLDING COMPANY ACT CLAIM

The jurisdiction of the federal courts is limited to the jurisdiction which Congress has prescribed. Local Division 732, Amalgamated Transit Union v. Metropolitan Atlanta Rapid Transit Authority, 667 F.2d 1327, 1330 (11th Cir.1982); accord Taylor v. Appleton, 30 F.3d 1365 (11th Cir.1994). In determining whether Congress intended to confer a private right of action, congressional intent is the dispositive inquiry. Amalgamated Transit Union, 667 F.2d at 1334-35; see also Touche Ross & Co. v. Redington, 442 U.S. 560, 568, 99 S.Ct. 2479, 2485, 61 L.Ed.2d 82 (1979) ("[O]ur task is limited solely to determining whether Congress intended to create the private right of action."). Congressional intent to create a private right of action will not be presumed. There must be clear evidence of Congress's intent to create a cause of action. Touche Ross, 442 U.S. at 570, 99 S.Ct. at 2486 ("[I]mplying a private right of action on the basis on congressional silence is a hazardous enterprise, at best."); Amalgamated Transit Union, 667 F.2d at 1335 ("In order for us to infer a private right of action, or federal jurisdiction, we must have before us clear evidence that Congress intended to provide such a remedy...."). Thus, the Court first examines the legislative history of the BHCA.

A. Legislative History Of The Bank Holding Company Act

1. The Anti-Tying Provisions of the BHCA

The BHCA was enacted in 1956. The original focus of the BHCA was the regulation of the power of bank holding companies to prevent a small number of powerful banks from dominating commerce and to ensure a separation of economic power between banking and commerce. Parsons Steel v. First Alabama Bank of Montgomery, 679 F.2d 242, 244 (11th Cir.1982); S.Rep. No. 91-1084, 91st Cong., 2d Sess., reprinted in 1970 U.S.C.C.A.N. 5519, 5535 (1970); 116 Cong.Rec. 32127 (1970). In 1970, Congress amended the Act to reach the anti-competitive practices of even smaller banks, which notwithstanding their comparative size, were able to exert economic power over businesses because of their control over credit.

Against this backdrop, Congress drafted a one paragraph, five subpart section prohibiting certain tying arrangements. The present incarnation of these provisions comprise § 1972(1), which provides as follows:

(1) A bank shall not in any manner extend credit, lease or sell property of any king, or furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement--

(A) that the customer shall obtain some additional credit, property, or service from such bank other than a loan, discount, deposit, or trust service;

(B) that the customer shall obtain some additional credit, property, or service from a bank holding company of such bank, or from any other subsidiary of such bank holding company;

(C) that the customer provide some additional credit, property, or service to such bank, other than those related to and usually provided in connection with a loan, discount, deposit, or trust service;

(D) that the customer provide some additional credit, property, or service to a bank holding company of such bank, or to any other subsidiary of such bank holding company; or

(E) that the customer shall not obtain some other credit, property, or service from a competitor of such bank, a bank holding company of such bank, or any subsidiary of such bank holding company, other than a condition or requirement that such bank shall reasonably impose in a credit transaction to assure the soundness of the credit.

The Board may by regulation or order permit such exceptions to the foregoing prohibition as it considers will not be contrary to the purposes of this chapter.

12 U.S.C. § 1972(1) (1994). Simultaneously, Congress enacted § 1975 of the BHCA, creating a private right of action in favor of individuals harmed by virtue of violations of the anti-tying provisions of the BHCA. Section 1975 states as follows:

Any person who is injured in his business or property by reason of anything forbidden in section 1972 of this title may sue therefor in any district court of the United States in which the defendant resides or is found or has an agent, without regard to the amount in controversy, and shall be entitled to recover three times the amount of the damages sustained by him, and the cost of suit, including reasonable attorney's fees.

12 U.S.C. § 1975 (1994).

In enacting the anti-tying provision of the BHCA, and providing a private right of action in favor of individuals injured by violations thereof, Congress was targeting anti-competitive banking practices. The Act proscribes anti-competitive ties which condition the extension of credit on a condition designed to increase the economic power of the bank and to reduce competition. Such a tie can manifest itself in many different forms. The bank can refuse to extend credit unless the consumer agrees to purchase a separate, unrelated bank service (a quintessential tie); the bank can condition the extension of credit on the consumer providing the bank with a specific product or service unrelated to the extension of credit (a reciprocal tie); or the bank can condition the extension of credit on the consumer's agreement not to engage in any transactions with one of the bank's competitors (an exclusive dealing arrangement). A tie can manifest itself in a number of other ways, but the touchstone for actionability under the anti-tying provision of the BHCA is that the arrangement be designed to lessen competition and increase the economic power of the creditor bank. Davis v. First Nat'l Bank of Westville, 868 F.2d 206, 208 (7th Cir.1989...