Bank of Utah v. Commercial Security Bank, 8459.

• Decision Date: 14 November 1966
• Docket Number: No. 8459.,8459.
• Parties: BANK OF UTAH, a Utah Corporation, and Bank of Ben Lomond, a Utah Corporation, Appellants, v. COMMERCIAL SECURITY BANK, a Utah Corporation, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

369 F.2d 19 (1966)

BANK OF UTAH, a Utah Corporation, and Bank of Ben Lomond, a Utah Corporation, Appellants, v. COMMERCIAL SECURITY BANK, a Utah Corporation, Appellee.

No. 8459.

United States Court of Appeals Tenth Circuit.

November 14, 1966.

COPYRIGHT MATERIAL OMITTED

David S. Kunz, Ogden, Utah (Ronald N. Boyce, Salt Lake City, Utah, on brief), for appellants.

Richard Haas, San Francisco, Cal. (Neil R. Olmstead, Ogden, Utah, Moses Lasky, San Francisco, Cal., on brief), for appellee.

Before MURRAH, Chief Judge, SETH, Circuit Judge, and CHILSON, District Judge.

MURRAH, Chief Judge.

At issue in this case is whether appellee Commercial Security Bank's contracts to supply the Ogden City and Weber County, Utah, School Boards with the "no-check" payroll service violate Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2.¹ Appellants Bank of Utah and Bank of Ben Lomond sued Commercial Security alleging the contracts constituted an unlawful restraint under § 1 and an attempt to monopolize under § 2 and seeking treble damage and injunctive relief. Commercial Security counterclaimed alleging tortious interference with its contract to perform the "no-check" service for an Ogden hospital. After trial to the court, the complaint was dismissed and Commercial Security awarded $7251.22 on its counterclaim. From this judgment the Bank of Utah and Bank of Ben Lomond appeal.

Within appellants' trading area, which was described as including Weber County² and parts of surrounding counties, at least eight commercial banks do business. Four of these banks are located in Ogden; their total resources on April 15, 1964, (the date closest to trial for which figures are available in the record) were approximately as follows: Bank of Utah — $16 million, Bank of Ben Lomond — $3 million, Commercial Security Bank — $50 million, and First Security Bank (a statewide chain) — $350 million.

In order to reduce the costs and simplify the process of handling their payrolls, the Ogden Board in 1961 and the Weber Board in 1963 requested area banks to submit proposals for the performance of payroll services. Appellee and First Security Bank submitted bids to both boards; appellant Bank of Utah submitted a bid to the Weber Board. In both cases the bid of appellee was accepted. Contracts terminable at the will of either party were executed, under which the "no-check" service is provided in return for a fixed monthly charge.³

Briefly the "no-check" payroll plan operates as follows: the bank computes the payroll from basic earnings and deductions data provided it by the board. The board issues to the bank one check in the amount of the total net payroll due. The bank in turn credits the net wages due each employee to special checking accounts⁴ set up with the bank in the name of each employee. Finally, the bank sends the employee a monthly statement showing gross pay, deductions, and the net pay deposited to his special account. The bank also prepares various other documents, such as social security and withholding tax forms.

A critical aspect of the plan is that each employee can make deposits to and write two free checks per month on his special account without charge. Moreover, although not provided for by the contracts, Commercial Security agreed at the behest of appellants to a second procedure by which an employee may have funds in his account with Commercial Security automatically transferred to either of appellants. Because of these features of the plan the court found that no employee was required to maintain funds on deposit with appellee; that an employee could transfer funds without charge; that the employees were aware of this right; and that many did in fact transfer their salaries from Commercial Security to other banks.

In his exhaustive opinion the trial court concluded that "The setting up of special accounts, when coupled with two free checks to withdraw the funds and the provision for automatic transfer of the funds to other banks, is a reasonable procedure * * *" and not an unreasonable restraint of trade.⁵ On the attempt to monopolize charge, the court concluded there was a failure to prove a specific intent to gain market control illegally. Finally, the court concluded on the counterclaim that because of statements made by officers of appellants to the hospital administrator, the "* * * plaintiffs are liable for tortiously inducing the breach of the hospital's contract with defendant Bank."

At the outset, Commercial Security denies that the trial court had jurisdiction of the subject matter under the Sherman Act for the reason that the "no-check" service is neither in nor affects commerce. Indeed, it argues that the trial court so concluded in its finding of fact 20. But, finding 20 merely states that the several paragraphs in appellants' complaint setting out the elements necessary to state a claim under sections 1 and 2 of the Act are "untrue". It is not a finding that jurisdiction is lacking, but rather a general finding that the elements necessary to support a Sherman Act claim were not proven.

We think the requisite connection with interstate commerce is present. It is true the transactions here complained of were intrastate, indeed intracounty, i. e. crediting individual checking accounts in an Ogden bank with funds transmitted to it by the Ogden City and Weber County School Boards.⁶ And, it is irrelevant that some of a bank's activities are in interstate commerce if those complained of are not. United States v. Yellow Cab Co., et al., 332 U.S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010; Page v. Work, 9 Cir., 290 F.2d 323; Lieberthal v. North Country Lanes, Inc., 2 Cir., 332 F.2d 269. However, the jurisdictional nexus with interstate commerce may also be demonstrated by a showing that the wholly intrastate activities had a substantial effect on interstate commerce. United States v. International Boxing Club, 348 U.S. 236, 75 S.Ct. 259, 99 L.Ed. 290; United States v. Shubert, 348 U.S. 222, 75 S. Ct. 277, 99 L.Ed. 279; United States v. Employing Plasterers Association, 347 U.S. 186, 74 S.Ct. 452, 98 L.Ed. 618. The average monthly payroll transmitted to Commercial Security under the two contracts was $565,000. Evidence is lacking as to how much of this money would have been deposited in Commercial Security in the absence of the "no-check" plan, and how much was transferred to other banks by free checks and automatic transfer. But, it would be unrealistic to say that Commercial Security did not realize some net increase in deposits and appellants some net decrease, with a corresponding effect on the funds available to the respective banks for their operations in the interstate financial markets in loans and securities. Interstate commerce was thus affected to some extent.

Commercial Security further contends that the Sherman Act is inapplicable here because the antitrust laws do not apply to contracts with governmental agencies acting in their official capacities. See E. W. Wiggins Airways v. Massachusetts Port Authority, 1 Cir., 362 F.2d 52; United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626; Eastern R. R. Presidents' Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464; Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315. The record is barren of any mention of this issue of law at any stage of the trial proceedings. In light of this and of the decision we reach on the merits of appellants' contentions, we are not disposed to rule on the issue unless it is jurisdictional. Commercial Security does not contend nor do the cases seem to hold that jurisdiction is lacking when the complained of activities involve a governmental agency; instead they seem to hold the Act inapplicable and the complaint insufficient to state a claim on which relief can be granted, i. e. see E. W. Wiggins Airways v. Massachusetts Port Authority, supra. We pass then to a consideration of the merits.

Appellants broadly assert, "* * * the record demonstrates that the trial court made seriously erroneous findings of fact which are not supported by the evidence and which were induced by an erroneous view of the law." However, they complain of no specific finding. We must, therefore, assume that only the conclusory findings are in dispute and all supportive findings unchallenged. The court concluded that "The contracts * * * are not in restraint of trade and commerce, are reasonable, do not constitute a combination or conspiracy in restraint of trade or commerce, and do not constitute an attempt by defendant to monopolize any part of trade or commerce." We will disturb this finding only if, despite evidence to support it, we are convinced from the whole record that a mistake has been committed. United States v. United States Gypsum, 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746.

On the Section 1 issue it is noteworthy that appellants conceded below that "* * * there has been no per se violation of the antitrust act and we are relying on the rule of reason * * *." But, though they do not contend for a per se violation, they cite and rely upon per se case law. Two of the cases, i. e. Fashion Originators Guild v. Federal Trade Commission, 312 U.S. 457, 61 S. Ct. 703, 85 L.Ed. 949, and Klors, Inc. v. Broadway Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741, involve group boycotting. The other case, Northern Pacific Railway v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed. 2d 545, involves a tying arrangement.

There is no boycott in this case; nor can the contracts be said to effect a legally enforceable tying agreement; nor is the evidence sufficient to justify an inference that the plan embodied in the contracts unduly deterred the Board employees from utilizing their two free methods of transferring their salaries to banks of their choice. Surely Commercial Security is not per se forbidden to utilize improved business methods and techniques wrought by...