First Nat. Bank of Fayetteville v. Smith, s. 74-1032 and 74-1050

Citation508 F.2d 1371
Decision Date21 April 1975
Docket NumberNos. 74-1032 and 74-1050,s. 74-1032 and 74-1050
PartiesFIRST NATIONAL BANK OF FAYETTEVILLE et al., Plaintiffs-Appellees, v. James E. SMITH, Comptroller of the Currency of the United States,Defendant-Appellant, Northwest National Bank, Intervenor-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

Paul Blankenstein, Atty., Dept. of Justice, Washington, D.C., for defendant-appellant.

F. H. Martin, Fayetteville, Ark., for plaintiffs-appellees.

Before GIBSON, Chief Judge, and BRIGHT and WEBSTER, Circuit Judges.

WEBSTER, Circuit Judge.

This appeal presents for our review the summary judgment entered by the District Court remanding to the Comptroller of Currency of the United States a previously approved national bank application submitted by ten individuals seeking to organize the Northwest National Bank in Fayetteville, Arkansas. 1 First National Bank of Fayetteville v. Smith, 365 F.Supp. 898 (W.D.Ark.1973). The suit for review of the Comptroller's preliminary approval of the application and for injunctive relief had been initiated by seven competing banks and two savings and loan associations, 2 each having its principal place of business in Washington County, Arkansas. The Proposed Northwest National Bank intervened in the District Court proceedings and, together with the Comptroller of Currency (the defendant below), prosecutes this appeal. We must decide whether the District Court properly concluded that the Comptroller's grant of preliminary approval was arbitrary, capricious and without rational basis.

The Standard of Review

A preliminary issue for our resolution concerns the proper standard of judicial review in cases such as the one before us. 3 The question arises first in the trial courts and again at the appellate level. The District Court correctly acknowledged that its scope of review was limited, that it could not hold a de novo hearing, and finally that it could overturn the Comptroller's decision only if it found that decision to be 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.' 4 See Camp v. Pitts, 411 U.S. 138, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973); Webster Groves Trust Co. v. Saxon, 370 F.2d 381 (8th Cir. 1966); Bank of Commerce of Laredo v. City National Bank of Laredo, 484 F.2d 284 (5th Cir. 1973), cert. denied, 416 U.S. 905, 94 S.Ct. 1609, 40 L.Ed.2d 109 (1974); cf. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). The District Court so found and remanded the charter application to the Comptroller for further consideration.

In urging that we uphold that determination, plaintiffs-appellees contend that our appellate review of the District Court's decision is circumscribed by Fed.R.Civ.P. 52(a), the 'clearly erroneous' standard. 5 In other words, appellees construe the outcome below as the product of factual findings which we may disturb only if 'clearly erroneous.'

Reliance on Rule 52(a), however, is misplaced. This is a case which the District Court properly decided on cross motions for summary judgment, and thus it saw that there were no genuine issues as to any material fact necessary to resolve. See Fed.R.Civ.P. 56. 'When a plaintiff who has no right to a trial de novo brings an action to review an administrative record which is before the reviewing court, 'the case is ripe for summary disposition, for whether the order is supported by sufficient evidence, under the applicable statutory standard, or is otherwise legally assailable, involve matters of law." Bank of Commerce of Laredo v. City National Bank of Laredo, supra, 484 F.2d at 289, quoting 6 J. Moore, Federal Practice P56.17(3), at 2472 (1965).

In such cases, the appellate court must render an independent decision on the basis of the same administrative record as that before the district court; the identical standard of review is employed at both levels; and once appealed, the district court decision is accorded no particular deference. See Polcover v. Secretary of the Treasury, 155 U.S.App.D.C. 338, 477 F.2d 1223, cert. denied, 414 U.S. 1001, 94 S.Ct. 356, 38 L.Ed.2d 237 (1973). Thus, we must review the evidence anew and determine whether the administrative action was arbitrary and capricious. 'In applying that standard, the focal point * * * should be the administrative record already in existence, not some new record made initially in the reviewing court.' Camp v. Pitts, supra, 411 U.S. at 142, 93 S.Ct. at 1244. As a result, 'the functions of this Court are virtually the same as those already performed by the district court, but, nonetheless are to be performed independently and carefully and without any presumption that the decision of the district court is correct.' Knox v. Finch, 427 F.2d 919, 920 (5th Cir. 1970).

Without engaging in any lengthy commentary on the possible inefficiency and delay engendered by this review procedure, see Polcover v. Secretary of the Treasury, supra, we accept it as controlling. 6 We proceed, therefore, to an independent examination of the administrative record in order to determine whether the Comptroller acted arbitrarily or capriciously in granting preliminary approval to the charter application of the Northwest National Bank. See Camp v. Pitts, supra; Bank of Commerce of Laredo v. City National Bank of Laredo, supra.

The Record

As the District Court did, we must consider the administrative record as a whole. See Camp v. Pitts, supra. That record was compiled in the following manner: The charter application was filed with the Comptroller on July 8, 1972. (A. 238.) According to the application, Northwest National Bank would provide a full range of banking services from a main office situated on Highway 71 North, Fayetteville, Washington County, Arkansas (A. 238.) The application proposed that the new bank be authorized to issue 40,000 shares of stock at $25 per share in order to finance an initial capital of one million dollars. (A. 239.) Under the plan submitted to the Comptroller, the individual applicants and prospective officers of the bank would retain 45% Of the shares issued while the remainder would be widely distributed to the public. (A. 373.) Extensive supporting documents were filed with the application, including an economic study of the vicinity of the proposed bank and the projected needs of that area, 7 as well as biographical and financial information on the individual applicants. (A. 245 et seq.).

Following the submission of the application, a commissioned National Bank examiner commenced a field examination on behalf of the Comptroller, pursuant to 12 C.F.R. 4.2(b) (1974). 8 (A. 30-47.) Simultaneously, interested regulatory agencies and competing financial institutions were notified of the pending application (A. 235-37); the nine plaintiffs-appellees filed letters of protest urging that no new bank was needed in the area and requested an opportunity to present their objections at a public administrative hearing (A. 207-32.) 9 on November 21, 1972, such a hearing was held before the Comptroller's Regional Administrator in Memphis, Tennessee, which was limited to a presentation of 'factual matters concerning the needs and convenience of the community for the new National Bank.' 10 (A. 501.) At that hearing the applicant bank presented four witnesses in support of its position; the protesting financial institutions called five witnesses in an effort to demonstrate why the charter should not be granted. (A. 499.)

Thereafter, reports and recommendations were submitted to the Comptroller by the National Bank examiner who had conducted the investigation; the Regional Administrator who had conducted the hearing; the Director of the Bank Organization Division; the Senior Economist of the Department of Economic Banking and Research; and Thomas G. DeShazo, Deputy Comptroller of Currency. With the exception of Mr. DeShazo, who recommended approval of the application, each of these members of the Comptroller's staff recommended disapproval. Without making any findings of his own, the Comptroller adopted Mr. DeShazo's findings and recommendation and granted preliminary approval of the application subject to sixteen specific conditions that the organizers would be required to fulfill before acquiring the charter. (A. 19 et seq.) Plaintiffs then sought an administrative stay of the Comptroller's grant of approval. The Deputy Comptroller thereupon reviewed the record and, in a lengthy memorandum reviewing the facts, recommended that the request for stay be denied (A. 56-62); the Comptroller concurred and denied an administrative stay. 11

All of the above described documents together with the transcript of the administrative hearing constitute the record which we must consider.

Reviewing the Record

The 'arbitrary and capricious' standard of review is a narrow one. Citizens to Preserve Overton Park, Inc. v. Volpe, supra, 401 U.S. at 416, 91 S.Ct. 814. Its scope is more restrictive than the 'substantial evidence' test which is applied when reviewing formal findings made on a hearing record. See Camp v. Pitts, supra, 411 U.S. at 141, 93 S.Ct. 1241; Webster Groves Trust Co. v. Saxon, supra, 370 F.2d at 387; Charlton v. United States, 412 F.2d 390, 398 (3d Cir. 1969) (Stahl, Circuit Judge, concurring). 'Administrative action may be regarded as arbitrary and capricious only where it is not supportable on any rational basis.' Carlisle Paper Box Co. v. N.L.R.B., 398 F.2d 1, 6 (3d Cir. 1968). Something more than mere error is necessary to meet the test. N.L.R.B. v. Parkhurst Manufacturing Co., 317 F.2d 513, 518 (8th Cir. 1963). To have administrative action set aside as arbitrary and capricious, the party challenging the action must prove that it was 'willful and unreasoning action, without consideration and in disregard of the facts or circumstances of the case * * *.' 73 C.J.S....

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