First National Bank of Fayetteville v. Smith

• Decision Date: 01 November 1973
• Docket Number: No. F-73-C-12.,F-73-C-12.
• Citation: 365 F. Supp. 898
• Parties: FIRST NATIONAL BANK OF FAYETTEVILLE et al., Plaintiffs, v. James E. SMITH, Comptroller of the Currency of the United States, Defendant, Northwest National Bank, Intervenor.
• Court: U.S. District Court — Western District of Arkansas

365 F. Supp. 898

FIRST NATIONAL BANK OF FAYETTEVILLE et al., Plaintiffs, v. James E. SMITH, Comptroller of the Currency of the United States, Defendant Northwest National Bank, Intervenor.

No. F-73-C-12.

United States District Court, W. D. Arkansas, Fayetteville Division.

November 1, 1973.

James F. Dickson of Crouch, Blair, Cypert & Waters, Springdale, Ark., F. H. Martin, Jr., of Ball, Gallman & Martin, Fayetteville, Ark., for plaintiffs.

Sam Hugh Park, Asst. U. S. Atty., Fort Smith, Ark., Harlington Wood, Jr., Asst. Atty. Gen., Harland F. Leathers and David C. Shonka, Attys., Dept. of Justice, Washington, D. C. (John E. Shockey and Edward Jiran, Attys., Office of Comptroller of the Currency, Washington, D. C., of counsel), for defendants.

OPINION

JOHN E. MILLER, Senior District Judge, Sitting by Designation.

On July 8, 1972, ten individuals, residents of the Fayetteville, Arkansas, area filed application with the Comptroller of the Currency for permission to organize a national bank in Fayetteville. The applicants filed financial, biographical and economic data in support of their application. A field investigation was conducted by a commissioned National Bank Examiner, and on November 21, 1972, the Comptroller's Regional Administrator held a hearing on the application in Memphis, Tennessee. The record developed by the investigation at the hearing was reviewed by the Examiner, the Regional Administrator and members of the Comptroller's staff in Washington, D. C. On February 5, 1973, the Deputy Comptroller, Thomas G. DeShazo, advised the applicants that the Comptroller had granted preliminary approval of the application to organize the Northwest National Bank at Fayetteville.

On February 16, 1973, the plaintiffs, First National Bank of Fayetteville, Ark., and one other national bank, together with five banks chartered under the laws of the State of Arkansas and two Savings and Loan Associations chartered under the laws of the State of Arkansas, all residents of the State of Arkansas, and maintaining their principal place of business in Washington County, Arkansas, commenced this action against Thomas B. Camp, the then Comptroller of the Currency of the United States, seeking to enjoin the Comptroller from issuing a charter to the applicants. Soon thereafter Mr. Camp retired and Justin T. Watson became Acting Comptroller.

On March 22, 1973, plaintiffs filed a request for production of documents.

On April 19, 1973, the defendant filed response to the request of plaintiff for production of documents. On July 18, 1973, the plaintiffs filed a motion for an order for sanctions against defendant for failure to make discovery. In the motion it was alleged that in the response of defendant to the request for production of documents, the defendant agreed to file the entire administrative file of his office except for certain personal information filed by the organizers, which the defendant asserted was privileged and not subject to discovery, and that the plaintiffs had constantly sought to obtain the administrative file but defendant had not at that time submitted and filed any portion of it. Upon the filing of that motion, the court on July 31, 1973, ordered the defendant to furnish to plaintiffs' counsel his administrative file accumulated on the matter herein under consideration, and reserved the question of whether sanctions should be imposed pending defendant's compliance with the order.

On August 28, 1973, the court set for hearing on September 14, 1973, application of plaintiffs for a preliminary injunction pending final determination of this cause, restraining the Comptroller from giving final approval and granting charter authorizing the applicants to operate a proposed facility.

On September 7, 1973, the plaintiffs filed a motion to compel defendant to fully comply with the request for production of documents as set forth in plaintiffs' motion of April 22.

On the date fixed for the hearing on the application for preliminary injunction, the defendant filed his motion for protective order with memorandum in support thereof based upon the affidavit of the Comptroller, in which he stated that the documents not heretofore submitted in the administrative file "may not be made a part of a public court record without significant injury to the Comptroller's office to conduct adequate investigations of national bank charter applications." He further stated that he did not include in the administrative file 52 documents with certain attachments "referring to information solicited and received in confidence from the applicants, commercial reporting services and other individuals with regard to the character, ability and financial affairs of the individual applicants and the proposed management of the applied-for national bank." Also omitted were ten individual memoranda or portions thereof prepared by national bank examiners concerning the character, ability and financial affairs of each of the applicants for the proposed new bank.

At the conclusion of the hearing on September 14, the court took under consideration the defendant's motion for protective order and the plaintiffs' application for preliminary injunction.

On October 4, 1973, the plaintiffs submitted their memorandum in opposition to the motion of defendant for protective order, and the court on that date entered an order directing the Comptroller to deliver in a sealed package to the Clerk of the Court the documents described in paragraphs 4(a) and (b) of the affidavit of the Comptroller attached to the motion to be inspected in camera by the court only.

On October 12, 1973, the court was advised that applicant would not request the Certificate of Authority from the Comptroller until this case had been disposed of on its merits. Thus, further consideration has not been given by the court to the motion of plaintiffs for a preliminary injunction.

The plaintiffs alleged in their complaint that they "are unable to obtain a meaningful judicial review without the Comptroller making and furnishing findings of fact, conclusions and rendering a well reasoned opinion justifying issuance of a charter on the application, and in the absence of such findings, conclusions and opinion the action of the Comptroller is void and unlawful, and further proceedings by him should be enjoined as any charter issued pursuant to his decisions would be void."

In paragraph 14 of the complaint the plaintiffs alleged:

"* * * that in the light of the economic data, exhibits and testimony presented to and gathered by Comptroller, that Comptroller acted arbitrarily and capriciously and abused his discretion in approving the issuance of a charter on the application on the basis of such economic data, exhibits and testimony. The proliferation of banking facilities in the Fayetteville area is highly questionable in view of the previous state determination concerning need, convenience and other factors, and because of the unknown and unprovable impact of another banking facility on existing banks and financial institutions so that Comptroller's action is contrary to public interest."

The answer filed by Justin T. Watson while he was Acting Comptroller denied the principal allegations in the complaint, and alleged that the plaintiffs attended the hearing on the application to organize the Northwest National Bank and that they were permitted to submit comments and materials in opposition thereto, and prayed that the complaint of plaintiffs be dismissed.

In the defendant's motion for summary judgment filed September 14, 1973, the Comptroller alleges "that the record now before the court establishes the Comptroller's decision was reasonable and in accordance with the law, that there is no genuine issue of material fact and that defendant therefore is entitled to a judgment as a matter of law."

In support of the motion the Comptroller refers to (1) the complaint, (2) the answer of defendant, and (3) the certified administrative file on the application dated July 8, 1972.

On October 12, 1973, the plaintiffs filed a cross motion for summary judgment pursuant to Rule 56(b), Fed.R. Civ.P., upon the grounds "that the record now before the court establishes that there is no genuine issue of material fact and that the plaintiffs are entitled to judgment in their favor as a matter of law."

The plaintiffs, in opposing the motion for protective order, contended that the defendant had not made the entire administrative file available to them and that without such information they are effectively denied an opportunity to review a significant and relevant part of the record upon which the defendant's decision is based. They therefore contended that they are entitled to a trial de novo to review the defendant's decision.

The defendant submitted the documents and material in accordance with the order of October 4, and the complete file that was before the Comptroller is now before the court, although not completed in the manner as suggested by the court in Camp v. Pitts (1973), 411 U.S. 138, 93 S.Ct. 1241, 36 L.Ed.2d 106. The court is of the opinion that the procedure followed in completing the administrative file is valid and cannot agree that plaintiffs are entitled to a de novo hearing. See, Peoples Bank of Trenton v. Saxon (6 Cir. 1967), 373 F. 2d 185; First National Bank of Crown Point v. Camp (N.D.Ind.1971), 342 F. Supp. 871; Bank of Dearborn v. Saxon (E.D.Mich.1965), 244 F.Supp. 394.

The court has examined the documents and material in strict accordance with the order of October 4. See, United States v. Certain Parcels of Land (S. D.Cal.1953), 15 F.R.D. 224, 233.

The action arises under Section 10 of the Administrative Procedure Act (5 U. S.C. §§ 701-706); Sections 21 through 27 of the National Bank Act (12 U.S.C. §§ 21-27); and Section 1 of the Declaratory Judgment Act (28 U.S.C. § 2201). The court's jurisdiction is founded on the existence of a federal question and the...