Durkin v. National Bank of Olyphant

• Decision Date: 12 September 1985
• Docket Number: No. 84-5875,84-5875
• Citation: 772 F.2d 55
• Parties: DURKIN, Lorraine A., Appellant, v. The NATIONAL BANK OF OLYPHANT, Check, Michael, J.; Crotti, Joseph; Friedman, Sheldon; Gentile, Fred J.; Kaplan, Saul; Rossi, Robert; Wassell, Joseph J. Zipay, Jr., Edward J.
• Court: U.S. Court of Appeals — Third Circuit

Page 55

772 F.2d 55

DURKIN, Lorraine A., Appellant, v. The NATIONAL BANK OF OLYPHANT, Check, Michael, J.; Crotti Joseph; Friedman, Sheldon; Gentile, Fred J. Kaplan, Saul; Rossi, Robert; Wassell Joseph J. Zipay, Jr., Edward J.

No. 84-5875.

United States Court of Appeals Third Circuit.

Argued July 18, 1985.

Decided Sept. 12, 1985.

Andrew Hailstone (argued), Bruce L. Morgan, Henkelman, Kreder, O'Connell & Brooks, Scranton, Pa., for appellant.

Morey M. Myers (argued), William W. Warren, Jr., Gelb, Myers, Bishop & Warren, Scranton, Pa., for appellees.

Before SEITZ, HIGGINBOTHAM and SLOVITER, Circuit Judges.

OPINION OF THE COURT

A. LEON HIGGINBOTHAM, Jr., Circuit Judge.

Lorraine Durkin, a shareholder of the defendant National Bank of Olyphant and the plaintiff in this corporate suffrage case, appeals from a final order of the district court dismissing her complaint for failure to state a claim upon which relief can be granted. Because we find that the National Bank Act, 12 U.S.C. Sec. 21 et seq., guarantees shareholders of national banks the voting rights that she alleges defendants violated, we reverse and remand for further proceedings.

I.

Durkin's grievance with the National Bank of Olyphant (NBO) and its directors stems from events surrounding the NBO's April 10, 1984 annual meeting and election. ¹ After receiving notice of the meeting and a management proxy on March 22, 1984, on March 26, 1984 Durkin filed a proper notice of her intent to nominate herself for a position on the Board of Directors with the Bank and with the Office of the Comptroller of the Currency, as required by law. On April 2 the board of directors amended the by-laws to prohibit any shareholder whose spouse is affiliated with any other bank from serving as a director. Durkin, whose husband is employed by another bank, received notice of the by-law change and NBO's intent to apply it to disqualify her as a nominee on Saturday, April 7, 1984--three calendar days and only one business day before the election. The time period for making nomi Durkin then commenced this suit alleging, inter alia, that the by-law was adopted for the express purpose of preventing her election, and that the board's conduct deprived her of the voting rights incident to her stock ownership and protected by 12 U.S.C. Sec. 61. She seeks a declaratory judgment to the effect that she was elected to office at the April 10, 1984 meeting, an injunction barring the NBO board of directors from meeting or transacting NBO business until she is "acknowledged" as a director, and compensatory damages. The United States District Court for the Middle District of Pennsylvania dismissed her complaint pursuant to Fed.R.Civ.P. 12(b)(6), finding Durkin's failure to attempt to nominate another candidate after the by-law change rendered her ineligible to serve on the board fatal to her claim that she was deprived of federally protected voting rights. Durkin appeals from this judgment. NBO argues that the district court's judgment of dismissal should be affirmed regardless of the requirement's validity because there was no federal subject matter jurisdiction over the case.

nations had lapsed by this date. The election proceeded as scheduled, at which time the presiding NBO official rejected her nomination and disallowed ballots cast for her. Each management nominee received 17,054 votes; had her nomination been accepted, Durkin would have received 32,000 votes.

II.

We turn first to the jurisdictional issue, as it implicates our power to hear this appeal.

The district court based its jurisdiction on 28 U.S.C. Sec. 1337, which empowers federal courts to hear claims arising under federal statutes regulating commerce ²--in this case 12 U.S.C. Sec. 61, a portion of the National Bank Act ³ and the source of the voting rights Durkin claims the Bank infringed. ⁴ NBO urges us to reverse this jurisdictional holding on the ground that the National Bank Act is not an act of Congress regulating commerce within the meaning of Sec. 1337 or, in the alternative, because the voting rights Sec. 61 grants do not include the right to make nominations and Durkin's claim thus does not "arise under" the statute. ⁵ We shall consider each of these contentions in turn.

A.

A statute need not create positive regulations imposing a duty or prescribing some conduct in order to be deemed one regulating commerce for Sec. 1337 purposes; it need only have been enacted under Congress' constitutional power to regulate commerce. Imm v. Union Railroad Company, 289 F.2d 858 (3d Cir.1961). Courts have recognized since McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 17 U.S. 316 (1819), that the Commerce Clause was at

                least a partial and a significant source of power for the creation and regulation of national banks;  thus the three courts of appeals that have addressed the issue have all held that the National Bank Act is an act regulating commerce within the meaning of Sec. 1337.   See Cupo v. Community National Bank and Trust Company of New York, 438 F.2d 108, 110 (2d Cir.1971);  Partain v. First National Bank of Montgomery, 467 F.2d 167, 171-72 (5th Cir.1972);  Burns v. American National Bank and Trust Company, 479 F.2d 26, 29-30 (8th Cir.1973).  The Burns and Cupo courts so held over objections similar to that which NBO raises here:  that 28 U.S.C. Sec. 1348, which grants federal jurisdiction over certain enumerated actions involving national banks, 6 precludes the exercise of jurisdiction under any other jurisdictional statute in cases involving national banks.  After a thoughtful historical analysis of the jurisdictional controversies surrounding national banks and the enactment of Sec. 1348, the Burns court concluded that "section 1348 ... was intended to eliminate the right of national banks to claim original or removal jurisdiction solely on the basis of being a nationally chartered corporation, and was not intended to eliminate jurisdiction in all suits involving national banks except those actions specifically permitted in the first paragraph thereof."    Burns, 479 F.2d at 28-29 (emphasis in original).    Cupo, too, held that Sec. 1348 "in no way negates federal jurisdiction under grants such as section 1337."   Cupo, 438 F.2d at 110.  The two district courts in this circuit that have considered the issue agreed, see Haas v. Pittsburgh National Bank, 60 F.R.D. 604, 609 (W.D.Pa.1973), and Acker v. Provident National Bank, 373 F.Supp. 56, 62-63 (E.D.Pa.1974), modified on other grounds, 512 F.2d 729 (3d Cir.1975), and so do we.
                

B.

The district court properly exercised jurisdiction if Durkin's claim "arises under" 12 U.S.C. Sec. 61. The question before us, therefore, is whether the voting rights Sec. 61 guarantees include the right to nominate candidates for directorships. We hold that they do.

Federal law has long protected the voting rights of national bank shareholders. Section 11 of the National Bank Act of 1864, 13 Stat. 102, R.S. 5144, from which 12 U.S.C. Sec. 61 is derived, explicitly granted both the right to vote and the right to do so by proxy. ⁷ Section 17 of the Banking Act of 1933, 48 Stat. 186, added cumulative voting to these rights. The 1933 Act was Congress' response to the corrupt practices involved in the 1929 collapse of the banking system. See 77 Cong.Rec. 3835 (1933) (statement of Rep. Steagall). The congressman advocating inclusion of cumulative voting during the debate on the bill saw it as crucial to preventing the targeted practices: by guaranteeing a modicum of minority representation on national bank boards, cumulative voting would act "in the nature of a brake upon the wild and extravagant practices" Congress was condemning, allowing minority shareholders to prevent "many of the excesses, many of the abuses, much of the malfeasance and misfeasance" perpetrated by banks and bank We must define the scope of Sec. 61 voting rights in a fashion consistent with Congress' articulated purpose in creating them. C.I.R. v. Engle, 464 U.S. 206, 104 S.Ct. 597, 604, 78 L.Ed.2d 420 (1984); Gartner v. Soloner, 384 F.2d 348, 355 (3d Cir.1967), cert. denied, 390 U.S. 1040, 88 S.Ct. 1633, 20 L.Ed.2d 302 (1968); Brown v. Secretary of Health and Human Services, 747 F.2d 878, 881 (3d Cir.1984). To interpret Sec. 61 rights as excluding nominating rights, as NBO urges, would violate this legislative intent by allowing the management of national banks to control the slates of director candidates, effectively eliminating any possibility of minority representation and assuring themselves unbridled control over bank affairs. Declining to give Sec. 61 a reading that so defeats its purpose, we hold that the statute gives national bank shareholders the right to nominate candidates to the board of directors.

officers. 77 Cong.Rec. 4025 (1933) (statement of Rep. Celler). The current version of Sec. 61 was thus clearly designed to curb the power of those who control the affairs of national banks.

We rest our holding as well on the common sense notion that the unadorned right to cast a ballot in a contest for office, a vehicle for participatory decisionmaking and the exercise of choice, is meaningless without the right to participate in selecting the contestants. As the nominating process circumscribes the range of the choice to be made, it is a fundamental and outcome-determinative step in the election of officeholders. To allow for voting while maintaining a closed candidate selection process thus renders the former an empty exercise. This is as true in the corporate suffrage context as it is in civic elections, where federal law recognizes that access to the candidate selection process is a component of constitutionally-mandated voting rights. See United States v. Classic, 313 U.S. 299, 316-317, 61 S.Ct. 1031, 1038, 85 L.Ed. 1368 (1941) (article I, section 2 right to choose congressional representatives includes the right to participate in primary elections); Smith v. Allwright, 321 U.S. 649,...