Federal Reserve Bank v. Metrocentre Imp. Dist.
| Decision Date | 23 June 1980 |
| Docket Number | No. LR-C-77-100.,LR-C-77-100. |
| Citation | 492 F. Supp. 353 |
| Parties | FEDERAL RESERVE BANK OF ST. LOUIS, a United States Corporation v. METROCENTRE IMPROVEMENT DISTRICT # 1, CITY OF LITTLE ROCK, ARKANSAS. |
| Court | U.S. District Court — Eastern District of Arkansas |
W. S. Miller, Jr., Eichenbaum, Scott, Miller, Crockett & Darr, Little Rock, Ark., for plaintiff.
Gus Walton, Wright, Lindsey & Jennings, Little Rock, Ark., for defendant.
The City of Little Rock, Arkansas, formed the Metrocentre Improvement District No. 1, a Central Business Improvement District for downtown Little Rock, pursuant to Ark.Stat.Ann. §§ 20-1601-1634 (Repl.1968) and Ordinance 12,869 of the City of Little Rock, adopted October 16, 1973. The Federal Reserve Bank of St. Louis (FRBSL) holds title to Lots 1-10 of Block 94 in Little Rock, all of which is located within the Improvement District. As a result of the formation of this District, the FRBSL was assessed an annual fee of $12,854.00, payable from 1977 through 2002, inclusive. The FRBSL has refused to pay the assessment and filed suit seeking a declaratory judgment that it is exempt from such assessments, for an injunction to restrain the defendant Metrocentre from making further assessments and from instituting any legal action to recover any assessments owed and for an order directing that defendant remove any existing assessments against the FRBSL's property.
Plaintiff contends that, as an agency or instrumentality of the United States government, and because of its exemption from all but real estate taxes granted by 12 U.S.C. § 531, the assessments are invalid because of being, respectively, violative of the Supremacy Clause of the United States Constitution, Art. VI, cl. 2, and because to allow such an assessment would be contrary to the clear intent of Congress.
Defendant contends that the FRBSL is not an agency or instrumentality of the government for the purposes of the assessment and that such assessments are not "taxes" from which the FRBSL is exempt. Defendant also asserts that the FRBSL has not complied with Ark.Stat.Ann. § 20-416 (Repl.1968) which requires that any contest of the validity of an assessment of this type must be made within thirty days of the publication of the ordinance. Plaintiff has admitted that it did not comply with § 20-416, and the record so reflects.
Since the immunity of an agency or instrumentality of the federal government can be waived only specifically by Congress, Bd. of Directors of Red River Levee Dist. No. 1 of Lafayette County, Ark. v. Reconstruction Finance Corp., 170 F.2d 430 (8th Cir. 1948), the primary question which this Court must address is whether the FRBSL is an agency or instrumentality of the government.
First, it must be noted that the FRBSL has been anything but consistent on that point. The FRBSL takes whatever position on its status as a governmental agency or instrumentality as appears expedient in a given situation. (Russell deposition, pp. 58, 94, 95, 101). Mr. Lawrence K. Roos, the president and chief executive officer of the FRBSL, stated in his deposition that the FRBSL has taken varying positions on this question depending on the "advantages or disadvantages for us." (Roos deposition, p. 9).
In establishing the Federal Reserve System, Congress provided for a two-part structure: (1) a system of independent regional institutions, owned by commercial banks in the region and locally controlled, i. e., the Reserve Banks; and (2) the Federal Reserve Board, a government-controlled entity to perform the function of a central bank and to provide general supervision over the Reserve Banks. The legislative history of the Federal Reserve Act demonstrates that Congress intended the regional Reserve Banks (such as the FRBSL) to be non-governmental entities, separate and distinct from the United States, owned by the commercial banks in the respective regions and designed to function essentially for private purposes, i. e., to collect checks, 12 U.S.C. §§ 248(o), 342, 360; to discount notes of member banks, 12 U.S.C. §§ 343, 344, 346, 348, 349, 352, 357; to make advances to member banks, 12 U.S.C. §§ 347-347c; to hold reserves for member banks, 12 U.S.C. § 461; and to purchase and sell securities on the open market, 12 U.S.C. §§ 353, 355, 359.
The legislative history of the Federal Reserve Act, which Act created the Board and the Reserve Banks, clearly indicates that there was to be a distinction between the regional Reserve Banks and the government itself. The House Report on the bill that became the Federal Reserve Act described the intended structure and function of the Reserve Banks as follows:
It the Committee recommends that these bankers' banks shall be given a definite capital, to be subscribed and paid by their constituent member banks which hold their shares, and that they shall do business only with the banks aforesaid and with the Government. H.R. Report No. 69, 63d Cong., 1st Sess. 16 (1913) Hereafter "House Report" (emphasis supplied).
The primary function of these Reserve Banks, according to the House Report, was to provide services for the commercial banks which own their stock. The Reserve Banks would be regulated by the federal government, as are the national commercial banks, but were not part of the government:
The Federal reserve banks ... would be in effect cooperative institutions, carried on for the benefit of the community and of the banks themselves by the banks acting as stockholders therein ... The committee, however, recommends that they shall be individually organized and individually controlled, each holding the fluid funds of the region in which it is organized and each ordinarily dependent upon no other part of the country for assistance. The only factor of centralization which has been provided in the committee's plan is found in the Federal reserve board, which is to be a strictly Government organization created for the purpose of inspecting existing banking institutions and of regulating relationships between them and the Government itself. House Report 17-18 (emphasis supplied).
The similarity of national bank and Reserve Bank powers is evident in a comparison of 12 U.S.C. § 24 with 12 U.S.C. § 341. See Lucas v. Federal Reserve Bank of Richmond, 59 F.2d 617 (4th Cir. 1932). Furthermore, it is evident that Congress did not intend the federal government to have the power to direct the day-to-day operations of the Federal Reserve Banks:
Congress structured the Reserve Banks as corporate entities, owned by commercial banks, "under the direction and supervision and control" of their own boards of directors and subject only to "general supervision" by the Federal Reserve Board. 12 U.S.C. §§ 301, 248(j).
Using the Federal Tort Claims Act (FTCA) as an example, the FRBSL lacks the indicia of close relationships with the United States that have traditionally led the courts to find agency status for other entities.
The test for determining whether an entity is a federal agency and whether its employees are "employees of the government" for purposes of the FTCA is whether the federal government has the power "to control the detailed physical performance" of the day-to-day operations of that entity. United States v. Orleans, 425 U.S. 807, 814, 96 S.Ct. 1971, 1975, 48 L.Ed.2d 390 (1976); Logue v. United States, 412 U.S. 521, 528, 93 S.Ct. 2215, 2219, 37 L.Ed.2d 121 (1973). Other factors which have been considered illustrative in determination of federal agency status are the entity's independent corporate status, Pearl v. United States, 230 F.2d 243 (10th Cir. 1956); Wickman v. Inland Waterways Corp., 78 F.Supp. 284 (D.Minn.1948); the entity's purpose and function. Pearl v. United States, supra; Goddard v. District of Columbia Redevelopment Land Agency, 287 F.2d 343 (D.C. Cir. 1961), cert. denied, 366 U.S. 910, 81 S.Ct. 1085, 6 L.Ed.2d 235 (1961); and federal involvement in the entity's finances, Goddard v. District of Columbia Redevelopment Land Agency, supra; Freeling v. Federal Deposit Insurance Corp., 221 F.Supp. 955 (W.D.Okl.1962), aff'd per curiam, 326 F.2d 971 (10th Cir. 1963); Handley v. Tecon Corp., 172 F.Supp. 565 (N.D.N.Y.1959).
Each Reserve Bank is a "separate body corporate," all of the stock of which is owned, not by the United States, but by the private commercial banks within the Reserve Bank's district that are members of the Federal Reserve System. 12 U.S.C. §§ 341, 282, 323; Roos deposition, pp. 4-5. Each Reserve Bank is under the supervision and control of its board of directors. 12 U.S.C. § 301. Two-thirds of the nine-member board of directors of each Reserve Bank are chosen by the stock-holding commercial banks. 12 U.S.C. §§ 302, 304. The remaining three directors are appointed by the Board; but these directors are not employees of the Board or of the United States. 12 U.S.C. §§ 302, 305. The board of directors of each Reserve Bank is empowered to prescribe by-laws regulating the business of the bank and to exercise all powers conferred by statute and incidental powers. 12 U.S.C. § 341. In addition, the Reserve Banks are authorized to appoint their officials and hire their own employees. The real property held by, and the buildings occupied by, the Reserve Banks are owned by the various Reserve Banks, not by...
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Federal Reserve Bank of St. Louis v. Metrocentre Improvement Dist. No. 1, City of Little Rock, Arkansas
...granted the Bank by 12 U.S.C. § 531 does not relieve the Bank from paying special assessments. Federal Reserve Bank v. Metrocentre Improvement District, 492 F.Supp. 353, 359 (E.D.Ark.1980). We reverse the district court. The first question we must face is whether the district court erred in......