Canal National Bank v. Mills

• Citation: 405 F. Supp. 249
• Decision Date: 18 December 1975
• Docket Number: Civ. No. 74-82 SD.
• Parties: CANAL NATIONAL BANK et al., Plaintiffs, v. Peter S. MILLS and Edward M. Levi, Defendants.
• Court: U.S. District Court — District of Maine

405 F. Supp. 249

CANAL NATIONAL BANK et al., Plaintiffs, v. Peter S. MILLS and Edward M. Levi, Defendants.

Civ. No. 74-82 SD.

United States District Court, D. Maine, S. D.

December 18, 1975.

Ralph I. Lancaster, Jr., and Gerald M. Amero, Portland, Me., Joseph B. Campbell, Augusta, Me., David N. Fisher, Jr., Edward J. Ashley, and David P. Cluchey, Portland, Me., for plaintiffs.

Robert J. Stolt, Asst. Atty. Gen., Augusta, Me., for amicus curiae, the Maine State Lottery Commission, supporting position of plaintiffs.

Eugene R. Sullivan, Gen. Litigation Section, Civ. Div., Dept. of Justice, Washington, D. C., for defendants.

OPINION AND ORDER OF THE COURT

GIGNOUX, District Judge.

This is an action brought under the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, seeking a declaration that Public Law 90-203, "An Act to prohibit certain banks and savings and loan associations from fostering or participating in gambling activities," 81 Stat. 608 (1967), codified at 12 U.S.C. §§ 25a, 339, 1730c, 1829a, 18 U.S.C. § 1306, does not prohibit plaintiffs' proposed activities as "participating banks" in the Maine State Lottery. Plaintiffs are five banking associations located in Maine.¹ Defendants are Peter Mills, United States Attorney for the District of Maine, and the Attorney General of the United States, now Edward H. Levi.² Plaintiffs contend that their participation in the Maine State Lottery will not violate Public Law 90-203; defendants assert that the Act makes such participation unlawful. The action is before the Court on cross-motions for summary judgment, each side urging its interpretation of the Act.³ The Court does not, however, reach the merits, for it is persuaded that, as defendants contend, the action does not present a justiciable case or controversy.

There are no disputed material facts, the parties having submitted the cause on a stipulated record.

I

Public Law 90-203 was enacted in 1967 in response to the establishment of state lotteries in New York and New Hampshire. The Act prohibits certain activities relating to state lotteries on the part of financial institutions belonging to any of four categories: national banks, state member banks of the Federal Reserve System, state nonmember banks insured by the Federal Deposit Insurance Corporation, and state savings and loan associations insured by the Federal Savings and Loan Insurance Corporation. As to each category, the operative language of the Act is the same:

(a) A financial institution may not —

(1) deal in lottery tickets;

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(c) As used in this section —

(1) The term "deal in" includes making, taking, buying, selling, redeeming, or collecting.

12 U.S.C. §§ 25a, 339, 1730c, 1829a.⁴ A final provision of the Act provides a criminal penalty of a fine of not more than $1000 or imprisonment for not more than one year, or both, for knowing violation of the Act. 18 U.S.C. § 1306.

A law establishing a state lottery in Maine was enacted by the Legislature and approved by referendum in November 1973. See 8 Me.Rev.Stat.Ann. §§ 351-367 (1975 Supp.). In the spring of 1974 the State Lottery Commission sought the services of local banks as "participating banks" in the administration of the lottery. In brief, the Commission proposed to deliver lottery tickets to the banks for distribution to retailers. The retailers would collect the tickets at the banks and later return to them the net cash proceeds and any unsold tickets. The banks would safeguard the tickets and proceeds and keep records of these transactions. In return the banks would receive a commission of one percent of gross sales and a "float" of approximately three to six days on the net proceeds. The details of the banks' contemplated participation are set out in two booklets circulated by the Commission, Basic Game Bank Operating Procedures (revised June 16, 1975) and Bank Procedures Maine Great Outdoors Instant Lottery (revised June 2, 1975).

The State Lottery Commission sought to assess the possible impact of Public Law 90-203 on such activities on the part of local banks by requesting interpretations of the Act from the appropriate federal regulatory agencies. Accordingly, it wrote to officials of the office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve Board, the agencies charged with the administration of the federal banking laws as they relate to the plaintiffs in this case.⁵ To each agency the Lottery Commission sent a copy of its proposed operating procedures; and from each the Commission received a favorable reply.

John D. Gwin, Deputy Comptroller of the Currency stated:

It is the view of this Office that the proposed utilization of banking facilities by Maine's State Lottery, in which the bank acts, in effect, as an escrow agent, would not be in contravention of federal banking laws.

Fredric H. Karr, an attorney in the Office of General Counsel of the Federal Deposit Insurance Corporation, replied:

Based upon the information provided, it is the opinion of the Legal Division of this Corporation that the services contemplated by the proposed plan do not violate the provisions of Section 20 of the Federal Deposit Insurance Act (12 U.S.C. § 1829a). Accordingly, this Corporation would have no objection to the participation of insured State nonmember banks as safekeeping facilities for the Maine State Lottery.

Finally, Chester B. Feldberg, Secretary of the Federal Reserve Board, stated:

Upon examination of the attachment describing the services and in view of your assurances that the services to be performed are essentially identical to those being performed for other State lotteries, particularly the New Jersey and Pennsylvania State lotteries, which services the Board has previously approved, the staff will interpose no objection under 12 U.S.C. § 339 to the performance of such services by State member banks for the Maine State lottery.

The State Lottery Commission also sought Mr. Mills' views on the legality of the banks' participation. Unlike the representatives of the federal regulatory agencies, Mr. Mills declined to give a favorable opinion. On June 25, 1974, he wrote the State Attorney General's office:

I have reviewed the operating procedures, but must tell you, of course, that I cannot undertake the responsibility which resides with the Attorney General of the State of Maine to give advice to the Commission.

A study of the Bank Operating Procedures together with the Agent Operating Procedures, and the statutes, Title 12, USC, Sec. 25(a) 25a, etc., may well lead you to conclude that the activities expected of the banks would be within the prohibition against dealing in lottery tickets despite the administrative opinions which appear to be somewhat to the contrary.

Subsequently, Mr. Mills publicly stated that in his view the proposed participation of the banks would violate Public Law 90-203 and that he intended to seek approval from the Department of Justice to bring any participating bank into court. On July 12, 1974 he stated

that it would be difficult for him "to apply a construction of federal law that would justify the banks' participation. It appears to me that there is no ambiguity in Public Law 90-203."

He further stated

that the banks "have put me in the position of having to ask court action." They "have forced me to either bring a complaint or ignore what appears to me to be a violation of federal statutes."

Finally, he

asserted a desire "to keep the option of filing a complaint against one or all banks that have participated as a test case. If participating banks are ultimately determined to be operating outside the law, it will be up to the courts to decide the proper correction."

The Maine press reported several similar public statements by Mr. Mills during the late summer and fall of 1974.

Plaintiff banks were, and remain, "ready and able" to perform the services requested by the Maine State Lottery Commission. Because of the statements made by Mr. Mills, however, they have to date refused to participate in the lottery. On July 23, 1974, they filed this action for declaratory relief.

Public statements suggesting that activities connected with state lotteries may violate various federal anti-lottery statutes were made during the fall of 1974 by William B. Saxbe, then Attorney General of the United States. On August 30, 1974, Mr. Saxbe invited officials of 13 states operating lotteries to meet with him in Washington to discuss possible violations of federal law. On September 6, the day of that meeting, the Justice Department issued a press release listing federal statutes "which are apparently being violated by some of sic all of the State-operated lotteries" and proposing remedial measures. The release indicated that the Department intended to press for remedial legislation. It stated:

The Criminal Division has recognized that strict enforcement of the gambling statutes by Federal authorities would have the effect of imposing an anti-lottery policy upon certain states which, through their respective legislatures, have determined that state conducted lotteries are in the public interest. . . .

* * * * * *

The Department's position is to support legislation which would permit the expansion of a legal state lottery to the fullest extent consistent with the lottery laws of her sister states. At the same time it would protect and uphold the laws of those states which have determined that lotteries are not in the best interest of its sic citizens.

At the meeting with state officials Attorney General Saxbe stated his intention not to put any state lottery "out of business" and his hope that "through a give-and-take process we can reach an understanding of the scope of the conflict between state lotteries and federal anti-lottery statutes and how best to handle it." At a press conference following this meeting Mr. Saxbe stated his intention to press for early passage of remedial legisla...