Gearheart v. Federal Reserve Bank of Cleveland, 74-2156

• Decision Date: 08 May 1975
• Docket Number: No. 74-2156,74-2156
• Citation: 516 F.2d 353
• Parties: 1975-1 Trade Cases 60,328 Donald K. GEARHEART and Richard Kurtz, Plaintiffs-Appellants, v. FEDERAL RESERVE BANK OF CLEVELAND et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 353

516 F.2d 353

1975-1 Trade Cases 60,328

Donald K. GEARHEART and Richard Kurtz, Plaintiffs-Appellants, v. FEDERAL RESERVE BANK OF CLEVELAND et al., Defendants-Appellees.

No. 74-2156.

United States Court of Appeals Sixth Circuit.

May 8, 1975.

Stanley M. Chesley, Waite, Schindel, Bayless & Schneider, Cincinnati, Ohio, for plaintiffs-appellants.

William W. Milligan, U. S. Atty., Robert G. Stachler, Taft, Stettinius & Hollister Cincinnati, Ohio, for defendants-appellees.

Before CELEBREZZE, MILLER and ENGEL, Circuit Judges.

PER CURIAM.

Appellants bring this appeal from the District Court's dismissal of their class action against the Federal Reserve Board, each director of the Federal Reserve System, and six Cincinnati-area banks. Appellants, Donald K. Gearheart and Richard Kurtz, were purchasers of $10,000 certificates of deposit at the Provident Bank. Appellants, on behalf of all purchasers of certificates of less than $100,000 at Appellee bank, challenged the validity of Regulation Q promulgated by the Federal Reserve Board.

Regulation Q, 12 C.F.R. § 217.7, limits the interest which can be paid on certificates of deposit in amounts less than $100,000, but, since a May 22, 1973 amendment, places no limits on the rate of interest which may be paid on certificates of deposit of $100,000 or more. The Regulation is challenged on numerous grounds. It allegedly denies equal protection to the poor, and violates the Robinson-Patman Act, the anti-trust laws, the federal securities laws and Sections 1983 and 1985 of the Civil Rights Acts.

The District Court in a well-reasoned thirty page opinion disposed of all the above arguments and found that Appellants had stated no cause of action for which relief could be granted.

Appellants seek strict scrutiny of Regulation Q, claiming that wealth is involved here and is a suspect classification. Receiving different rates of return on certificates of deposit of different amounts hardly can be regarded as a deprivation even approaching the magnitude of an alleged deprivation of freedom of speech or the right to vote. The District Court correctly concluded that the Regulation need only have a rational basis to withstand constitutional scrutiny. San Antonio School District v. Rodriquez,411 U.S. 1, 93 S.Ct. 1278, 36 L.Ed.2d 16 (1973); Richardson v. Belcher,404 U.S. 78, 92 S.Ct. 254, 30 L.Ed.2d 231 (1971). Regulating interest rates prevents unfair competition for savings accounts and helps to regulate the country's monetary flow. The regulation is rationally supported and thus withstands constitutional scrutiny.

Having concluded that Regulation Q is constitutional, we turn to the numerous alleged statutory violations. A necessary element of a civil rights claim pursuant to 42 U.S.C. §§ 1983 and 1985 is the violation of a constitutional right. No such violation has here been demonstrated and the District Court was correct in its dismissal of the civil rights claims.

Appellants argue that Appellee banks have violated various provisions of the Securities Act of 1933 and the Securities and Exchange Act of 1934 by selling certificates without disclosing a material...